European Council adopts electricity market reform

The new rules give the Council the power to declare a crisis, on the basis of a European Commission proposal, in the event of very high prices in wholesale electricity markets, or if there is a sharp increase in electricity retail prices.

Action to be taken by member states in case of a declared electricity crisis includes already existing measures under the current EU rules, such as further reduction of electricity prices for vulnerable and disadvantaged customers.

Member states should also prevent any undue distortion of the internal electricity market, including by ensuring level-playing field for suppliers during the crisis period.

“Today marks an EU milestone towards a carbon-free and greener future for all. With the adoption of the electricity market reform, we are empowering consumers, ensuring security of supply, and paving the way for a more stable, predictable, and sustainable energy market,” said Tinne Van der Straeten, Belgian minister for energy.

Power purchase agreements (PPAs) are long-term contracts that provide stability for customers and investors. The updated rules promote their uptake and cut unnecessary red tape and charges.

In line with their decarbonisation plans, member states may further support investment in renewables under PPAs, including by setting up guarantee schemes, an official release said.

Moreover, member states will also use two-way contracts for difference (CfDs), or equivalent schemes with the same effects, for their direct price support schemes, to support new investments in electricity generation and make sure electricity prices are less affected by price volatility of fossil fuel-based markets.

Under a two-way contract for difference with a public entity, energy generators would be protected with minimum remuneration while it should be ensured that they operate and participate efficiently in the electricity markets and react to market circumstances.

In high price periods, they would have to pay back excess revenues, which can then be distributed to final customers (while avoiding distortions to competition and trade in the internal market), be invested to reduce electricity costs for final customers or used to develop distribution grids.

Two-way contracts for difference can apply to investments in new power-generating facilities based on wind energy, solar energy, geothermal energy, hydropower without reservoir and nuclear energy.

Member states will reinforce their measures to protect vulnerable and energy poor customers, including banning disconnections. The reform also further encourages energy sharing schemes, in complement to the existing provisions on renewable energy communities and citizen energy communities.

The electricity market regulation formally adopted will now be signed and published in the Official Journal of the EU.  It will enter into force on the twentieth day following publication and will then become directly applicable in all member states.

Fibre2Fashion News Desk (DS)