OUR European Commission proposed his reform today European electricity marketwith the aim of strengthening renewable energy sources, better protecting consumers and increasing the competitiveness of industry.

“The EU has had an efficient, well-integrated electricity market for more than twenty years, which allows consumers to benefit economically from a single energy market, ensures a reliable energy supply and contributes to the decarbonization process,” the European Commission said in a statement. However, it notes that “the energy crisis caused by the Russian invasion of Ukraine has demonstrated the need to quickly adapt the electricity market to better support the green transition and provide energy consumers, both households and businesses, with broad access to affordable electricity from renewable and non-fossil sources. sources.”

The reform proposed by the Commission provides for revision of various EU legislation, in particular the Electricity Regulation, the Electricity Directive and the Regulation on Fairness and Transparency of the Wholesale Energy Market (REMIT). It introduces measures to encourage long-term contracts for non-fossil power generation and introduces cleaner, flexible solutions to compete with gas, such as demand response and storage, into the system. According to the Commission, this will reduce the impact of fossil fuels on consumers’ electricity bills and reflect the lower cost of renewables. In addition, the proposed reform will encourage open and fair competition in European wholesale energy markets, increasing market transparency and integrity.

Creation of one an energy system based on renewable energy sources is vital not only to reduce consumer bills, but also to ensure a sustainable and independent energy supply for the EU., in line with the European Green Deal and the REPowerEU project. This reform, which is also part of her industrial plan Green Deal, will allow European industry to access affordable energy from renewable, non-fossil sources, which is a key factor in decarbonization and the green transition. The Commission says that renewable energy use must triple by the end of this decade to meet energy and climate targets.

The Commission believes that its proposals to reform the electricity market will enable consumers and suppliers to benefit from increased price stability through renewable and non-fossil energy technologies. Most importantly, they will offer consumers a wider choice of contracts and clearer information before signing a contract so that they can secure, long-term prices and avoid excessive risk and excessive volatility. At the same time, they will still be able to choose dynamic pricing contracts to take advantage of price volatility and use electricity when it is cheaper (for example, to charge electric vehicles or use heat pumps).

In addition, the reform aims to improve price stability by reducing the risk of supplier defaults. The Commission proposes that suppliers should be required to manage price risk, at least in terms of fixed-price contract volumes, so that they are less exposed to price fluctuations and market volatility. It also obliges member states to create providers of last resort so that no consumer is left without electricity.

In addition, based on the proposed reform Member States must protect vulnerable consumers facing payment delays so that they are not disconnected from the grid.. It also allows Member States to extend regulated retail prices to households and SMEs in the event of a crisis.

To increase the flexibility of the electricity supply system, Member States will be asked to assess their needs, set targets for increased flexibility based on non-fossil sources, and will be able to introduce new support schemes, in particular for demand response and storage. The reform also allows system operators to purchase services to reduce peak demand.

In addition, in order to improve the competitiveness of EU industry and reduce its dependence on volatile prices, the Commission proposes to facilitate the establishment of more stable long-term contracts, such as power purchase agreements (PPAs), through which companies provide their own direct energy supplies. and therefore can benefit from more stable prices for electricity generation from renewable and non-fossil sources.

To ensure income stability for electricity producers and protect the industry from price volatility, any government support for new investment in sub-threshold or mandatory renewable and non-fossil energy production must take the form of a bilateral contract for difference (CfD) and Member States must pass on excess income to consumers. In addition, the reform will increase liquidity in the markets for long-term contracts that fix future prices, the so-called “futures”. This will allow more suppliers and consumers to hedge against high price volatility for longer periods of time.

Finally, to ensure competitive markets and transparent pricing, the Energy Regulators Cooperation Agency (ACER) and national regulators will have enhanced capacity to monitor the integrity and transparency of the energy market. In particular, the updated Wholesale Electricity Market Integrity and Transparency Regulation (REMIT) will provide better data quality and strengthen ACER’s role in investigating potential abuses in the cross-border market. Overall, this will strengthen the protection of EU consumers and industry from any kind of market abuse.

The proposed reform must now be discussed and agreed upon European Parliament and the Council prior to its entry into force.

Source: RES-IPE