Electricity market reform brings 80 GW more of solar and wind

The European Commission has formally presented its proposal to reform the European electricity market, which provides for consumers to be able to have energy supply contracts with fixed prices, multiple meters at home, and different energy suppliers and tariffs at the same time.

Despite these changes, and the introduction of mechanisms to ensure greater long-term stability - such as power purchase agreements (PPA) to protect consumers, and two-way contracts for difference (CfD, a derivative financial product) to encourage investment in renewables - European Energy Commissioner Kadri Simson assured that "the fundamentals of the European electricity market remain untouched.

The reform of the European Union's electricity market "will not change the mechanics of price formation in the spot market," but responds to the "flaws" that were exposed by the energy crisis, achieving a "decoupling of electricity prices from gas prices. "Our proposal will make the European electricity market fit for the future," the commissioner stressed.

Read Also Read Brussels wants electricity contracts with fixed prices, multiple meters at home and dynamic tariffs

Given that last year many households and businesses were affected by volatile energy prices, the European Commission now wants to facilitate the use of more stable long-term contracts, such as Power Purchase Agreements (PPAs).

On the other hand, to ensure revenue stability for energy producers, public support for new investments in renewable electricity generation will have to be in the form of two-way contracts for difference (CfD), with revenues going to consumers.

"These two instruments will be fundamental to increase the stability and predictability of energy costs throughout the European Union," argued Kadri Simson, predicting that with bidirectional CfDs it will be possible to increase solar production in Europe by 50 GW and wind generation by 30 GW, with revenues of 12 billion euros for member states.

Brussels also wants to oblige member states to establish suppliers of last resort (CUR) and regulated tariffs, as already exists in Portugal, for example. According to the proposal, energy sharing rules should also be reformulated. "Consumers will be able to invest in wind or solar farms and sell their excess electricity to their neighbors, and not just to the grid," the European Commission said in a statement.

With this reform of the European Union's electricity market project (which has been in existence for more than 20 years and has enabled annual savings of around 34 billion euros per year), the EU executive wants to: accelerate installed capacity of renewable energy (it must triple by 2030), phase out gas, reduce electricity prices to make them less dependent on the volatile prices of fossil fuels, ensure that the lower cost of renewable energy is reflected in consumers' bills, guard against future price spikes and potential market manipulation.

The proposal that was in public consultation and is now being considered foresees revisions to several pieces of European Union legislation, namely the Electricity Regulation, the Electricity Directive and the REMIT Regulation.

2030CapacityThe European Commission argues that the installed capacity of renewable energy must triple by 2030.