EU Lays Out New Electricity Market Design

The European Commission on Tuesday laid out its proposed changes to the EU power market design, a reform package that focuses on boosting investment in renewable energy and protecting consumers. The proposal underlines the bloc’s aim of “bringing the lower cost of renewables to consumers” and giving them the choice for their supply contracts. It also confirmed a hedging obligation for suppliers, mentioned earlier in the EU consultation but rejected by most market participants. The reform also aims to ensure that suppliers offer different types of long-term contracts, notably fixed-price deals, with consumers being able to sign multiple contracts. And a supplier of last resort will be established in every member state.

The commission believes the measures would lead to a situation where there is less supplier bankruptcy.

An amendment of the Remit directive and a strengthening of EU energy regulators association Acer’s role in cross-border investigations is also expected to protect consumers against market manipulation.

The commission also asks member states to ensure that small companies have access to a market based guarantee for power purchase agreements (PPAs). Member states can decide to put in place that guarantee scheme, but should not provide support to PPAs that purchase generation from fossil fuels.

And contracts for difference (CfDs) were listed as the required tool states should use when support is deemed necessary for renewables and new nuclear projects.

Technological upgrades, including re-powering or life span extensions for existing nuclear plants, will also be supported through CfDs.

Renewable energy investment is expected to be boosted through “transparency obligations” for system operators on grid congestion, with further support coming from the gate closure time of the intraday market being brought closer to the time of delivery to make trading more efficient. The creation of regional trading hubs was listed as one of the ways to increase liquidity in forward markets.

A final legal text will now have to be approved by the European Parliament and EU member states before coming into force. The Commission wants the legislation to take effect before next winter and before EU elections in May-June 2024.

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