Improving the design of the EU electricity market [EU Legislation in Progress]

Written by Agnieszka Widuto (1st edition).

On 14 March 2023, the European Commission proposed a reform of the EU electricity market, with the aim of reducing price volatility for consumers and creating favourable conditions for investors in low-carbon energy. The reform includes two legislative proposals – one on electricity market design (EMD) and the other on protection against wholesale energy market manipulation. These two proposals revise five pieces of EU legislation.

The electricity market reform seeks to make the energy bills of consumers and businesses less dependent on short-term price fluctuations, which are often driven by fossil fuel prices. It also improves consumer protection by offering more fixed-priced contracts and enhancing supplier obligations, and incentivises solutions such as energy communities, self-consumption and renewable energy sharing.

The reform supports the use of more long-term instruments such as power purchase agreements and contracts for difference, and improves integration and liquidity in forward markets. It also enhances flexibility solutions such as demand response and storage. Furthermore, it aims to improve market monitoring and transparency, and protection against manipulation.

Both legislative proposals will now be negotiated by the European Parliament and the Council.

Versions

• April 2023: Improving the design of the EU electricity market (1st edition)