The European Commission (EC) on Tuesday outlined its proposed reform to the EU's electricity market design in the wake of the energy crisis sparked by Russia's invasion of Ukraine.
After functioning well for more than 20 years, the EU electricity market is now deemed to need an update to better align it with the green transition.
“Renewables are our ticket to energy sovereignty and ending our dependence on fossil fuels,” said Frans Timmermans, executive vice president for the European Green Deal. “We need to update our market design to ensure that this transition happens as quickly as possible, and that consumers can benefit from the lower costs of renewables,” he added.
The EC is proposing to facilitate the deployment of Power Purchase Agreements (PPAs), with member states obliged to make available market-based guarantees for PPAs.
Under the changes, all public support for new investments in renewables will be in the form of two-way contracts for difference (CfDs).
WindEurope chief executive Giles Dickson said that two-sided CfDs have been a good model to ensure revenue stabilisation but added that they are no panacea. “The Commission has done the right thing, allowing operators to also sell their power under a PPA or to go fully merchant,” he said.
The reforms also seek to improve the flexibility of the power system. Member states will now be asked to assess their needs, establish targets to increase non-fossil flexibility and will have the possibility to introduce new support schemes, especially for demand response and storage, the Commission said.
There are also proposals on energy sharing that will allow consumers to sell excess rooftop solar electricity to neighbours.
Industry groups SolarPower Europe and WindEurope are supportive of the changes, noting that they do not revamp the market fundamentals but rather build on the existing design.
WindEurope said that the market revision aims to end investment uncertainty caused by a patchwork of national market interventions after the spike in gas prices.
The EC’s proposals will now have to be discussed and agreed upon by the European Parliament and the Council.
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