Magazine

Last edition
October 2024

Home › Policies & Regulations ›European Council Agrees on Electricity Market Reform to Boost Renewable Energy

European Council Agrees on Electricity Market Reform to Boost Renewable Energy

The move is part of a broader initiative to revamp the EU's electricity market design, addressing concerns such as market manipulation and transparency.

December 18, 2023. By Abha Rustagi

In a significant development aimed at reshaping the European Union's (EU) electricity market, the European Council has reached a consensus on a comprehensive reform designed to enhance the stability of electricity prices, accelerate the deployment of renewable energies, and fortify consumer protection.

The move is part of a broader initiative to revamp the EU's electricity market design, addressing concerns such as market manipulation and transparency.

The reform proposal, adopted by the European Commission on 14 March, has been a focal point of negotiations marked by a prolonged dispute between France and Germany over the role of nuclear power in European climate action.

Despite months of deliberations, an agreement was finally reached in October, paving the way for amendments to the EU's electricity market design to include existing nuclear plants.

One of the key measures embraced in the agreement is the adoption of two-way contracts for difference (CfDs) or equivalent schemes, ensuring parity with the model used in cases involving public funding through direct price support schemes for long-term contracts.

These two-way CfDs are set to be applicable to investments in various power-generating facilities, including those based on wind energy, solar energy, geothermal energy, hydropower without reservoir, and nuclear energy.

The Council highlighted that the rules governing two-way CfDs will come into effect after a transition period of three years from the regulation's entry into force, providing stability for ongoing projects during this period.

Kadri Simson, Commissioner for Energy, expressed optimism about the agreement, stating, "This agreement is great news for our consumers. With renewables playing an increasing part in the EU’s energy mix, it is about time that our citizens and businesses start reaping the benefits of the clean energy transition on their bills. A future-proof electricity market design is a key asset in triggering investments in clean power production and flexibility, supporting our efforts to reach a climate-neutral energy system while ensuring prosperity."

The reform signals a commitment to a sustainable and resilient energy future for the EU, aligning with the broader goals of transitioning towards clean energy sources and bolstering the region's resilience against market uncertainties.

Tags:

Policies & Regulations

EU electricity market

Contracts for Difference

Renewable energy

Nuclear energy

Kadri Simson

Climate neutral energy