The European Commission must play a key role in ensuring fair competition among EU countries as they upgrade their power grid infrastructure to keep prices stable, Portuguese Energy and Environment Minister Maria da Graça Carvalho told Euronews.
The Portuguese minister, who notably led political talks on the electricity market law, said that ensuring a level playing field will be “essential” to lowering electricity prices evenly across the EU.
If electricity becomes much cheaper through artificial means in one country, it will inevitably impact the others and put their industries at risk of unfair competition, according to Carvalho.
The Commission’s duty is to ensure the single market according to common rules, she said. Carvalho added that government support for energy companies across EU countries requires “clear and transparent rules to avoid distortions in competition law” and that the Commission needs to oversee such a task.
“This is something that worries us, because countries that can invest much more — a way to reduce competition by injecting public finance into the electric system — artificially lower the price of electricity and thus help their industries more than others,” Carvalho told Euronews.
Portugal was listed in three of the eight key projects highlighted in the Commission’s recent plan to increase resilience in the bloc’s electricity infrastructure by 2040 and lower energy prices — two electricity interconnections across the Pyrenees and one hydrogen project connecting Portugal and Germany.
The plan aims to ensure a more robust electricity flow across EU countries and to increase the uptake of renewable energy to power the electricity grid. EU countries will need to invest substantially in this venture, but some may be better positioned due to their stronger ability to tap public funds.
Seizing the political momentum, Portugal and Spain are joining forces with other countries to promote fair competition and prevent market distortions in the energy sector.
Recently, a group of countries — Austria, Belgium, the Czech Republic, Estonia, Finland, France, Greece, Ireland, Luxembourg, and the Netherlands — joined Portugal and Spain to continue working on competition issues to prevent laws that contradict free competition, targeting projects under the Commission’s grid package.
Grid upgrading will require ‘significant EU investment’
The Commission forecasts that a mammoth €1.2 trillion will be needed to revamp the bloc’s grid infrastructure by 2040. The structure of financing remains unclear.
In theory, the EU could tap into a range of options, including EU funds, national budgets, private investment, and cost-sharing, especially given the scale of the required investment. But that will require political consensus and the European energy market, as well as its components, remains highly fragmented.
“There is a small part coming from EU funding, which is what worries me,” Carvalho said.
In Portugal, part of the infrastructure investment comes from the government-set tariff. The system feeds into the national electric system, which is then distributed to all consumers.
Access to the networks and investments in the networks are included in the tariff, the Portuguese minister explained. When the electricity bill includes a production component and a network access component, it covers the network’s investment over the years.
“That’s why when we authorise an investment in the networks, we always have to worry about its impact on the tariff because it does not come out of the state budget but out of the pockets of everyone who pays electricity bills,” said Carvalho. “The more we go after the European funding, the less we get into the tariff.”
The European Connecting Facility, which will partly finance the Commission’s grid plan, will cover a part of the three projects, while the remaining could be funded through the European annual budget. To prop up funding, the Portuguese government is also considering making a loan to the bank to invest in networks.
The former MEP, who hails from the centrist European People’s Party (EPP), said that financial tools such as Power Purchase Agreements (PPAs) and Contracts for Difference (CfDs) are good examples of mechanisms to address competitiveness among EU countries that need to upgrade their grid infrastructure.
PPAs and CfDs are usually between a public party and a private party. The CfDs are contracts with a cap and a floor that may be unrelated to government support, but they may be backed by a state guarantee.
“Some countries want to promote electricity investment by using CfDs where there is a guarantee from the state to protect investments,” Carvalho said.
“But evvel again, and as written in the report on the electric market, the competition must supervise the quantity of CfDs that have state protection or state guarantees, to avoid major disruptions to the competition,” she cautioned.
Portugal big bet on clean energy but connectivity issues remain
Portugal is on track to become a clean power nation, with hydropower, solar, and wind accounting for roughly 71% of its energy mix in 2024,
Quoted from Euronews.
