Electricity market reform: EU solutions against price volatility
Learn about the reform of the EU's electricity market reform, which will lower costs, support green energy and keep prices more stable.
For more than 20 years, the EU has had a well-functioning electricity market. However, and the increased volatility of the energy market that ensued highlighted the overreliance on fossil fuel imports.
In April 2024, Ϸվ adopted a proposal to reform the rules for the electricity market. The focus is on encouraging long-term contracts for non-fossil energy, introducing cleaner flexible solutions, and increasing market transparency. Overall, the proposed reforms aim to create a more resilient and sustainable energy market.
Making electricity prices more stable
The EU wants to make sure that both energy producers and consumers benefit from predictable prices. One way to achieve this is through two-way contracts for difference (CFD) for new investments in low carbon energy production where public funding is needed.
This means that national authorities agree with electricity producers predefined ranges for energy prices. This benefits everyone: the producer can be sure to be able to sell energy at a predictable price, all the while providing important new energy to consumers.
In areas where two-way contracts for difference are not relevant, power purchase agreements (PPA) are promoted. They also have the effect of creating long-term stability.
A shift towards a renewable energy system is vital in order to ensure a sustainable and independent energy supply for the EU. That is why the EU is setting ambitious goals. In 2023 it adopted , raising the EU’s binding renewable energy target for 2030 to a minimum of 42.5 percent, in line with the European Green Deal.
Renewable energy stabilise prices
Protecting consumers is a priority. The electricity market reform offers more stable prices based on renewable energy, but it also gives consumers the choice between secure long-term contracts and dynamic pricing for flexibility. Vulnerable consumers are protected and the preservation of energy is encouraged.
To increase the power system’s flexibility, EU countries must assess their needs, set goals for non-fossil power production, and work to enable energy storage.
Regulation of the gas market
Together with the reform of the electricity market, another piece of legislation was adopted by the Ϸվ. It concerns the regulation on the internal markets for renewables and natural gases, and for hydrogen. It will promote renewable and low-carbon gases like hydrogen. The aim is to address climate change and reduce the EU's dependence on Russian fossil fuels.