BRUSSELS, 15 DECEMBER 2023 - Yesterday, the European Council and Parliament reached a provisional agreement on the reform of the EU’s electricity market design (EMD). ENTSO-E praises the efforts made by the negotiating team and would like to congratulate all parties involved.
ENTSO-E supports the objectives of the European Commission legislative proposals to optimise the current electricity market design for a decarbonised energy system and to improve affordability for consumers. ENTSO-E is pleased to see a number of crucial elements were incorporated in the provisional agreement.
The agreed framework for two-sided Contracts for Difference (CfDs) – or equivalent schemes – for public investments in new power generating facilities reflects a forward-looking approach to strengthen long-term investment signals for renewable and low-carbon generation. Nevertheless, throughout implementation CfDs will need to be carefully designed to avoid distortions in short-term and balancing markets or increases in system costs.
The inclusion of capacity mechanisms as a possible structural element of the electricity markets is welcomed by TSOs as these can be essential to support investments in resources needed to balance and secure the system on the path to carbon neutrality, and not as a last resort.
The current market design reform puts Europe on the right track for carbon neutrality by strengthening investment signals for renewables and low carbon generation, promoting flexibility and demand response, improving consumer protection and reducing their exposure to fossil fuel prices volatility. However, this is only the first step and more will need to be done in the coming years.
ENTSO-E looks forward to the successful implementation of these reforms and continues to support initiatives that contribute to a power system for a carbon-neutral Europe.