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EU Council approves updated electricity and gas market reform rules

With the approval of the newly updated electricity and gas market reform rules, consumers of the European Union (EU) will now be able to benefit from more stable energy prices, less dependency on the price and supply of fossil fuels and better protection from future crises, announced the EU Council in a statement on Tuesday, 21 May.

At the same time, the EU will also boost the development of hydrogen and other decarbonised gases. These reforms will help to ensure the European transition to clean energy while they will also enhance supply security and consumer protection on the way toward a carbon-free and greener EU.

“With the adoption of the electricity market reform, we are empowering consumers, ensuring the security of supply and paving the way for a more stable, predictable and sustainable energy market,” reacted Belgian Minister for Energy Tinne Van der Straten on behalf of Belgium’s Presidency of the Council.

With the new market reform rules, consumers will have more options: a wider choice of contracts and clearer information before signing contracts; an option to lock in secure, long-term prices; dynamic pricing contracts to take advantage of price variability (using electricity when it is cheaper); protection from being without electricity (establishing suppliers of last resort); protection from disconnection for those who are vulnerable or energy poor; and more opportunities for energy sharing (tenants will be able to share surplus rooftop solar power with neighbours).

Updated electricity market reform rules promote the uptake of power purchase agreements (PPAs) and cut unnecessary red tape and charges. According to their decarbonisation plans, EU Member States can further invest in renewable energy sources under these PPAs, for example, by setting up energy efficiency obligation (EEO) schemes.

EU Member States can also use two-way contracts for difference (CfDs) or similar schemes with the same effects for their direct price support schemes. This will support new investments in electricity generation and make sure electricity prices are less affected by the price volatility of fossil fuel-based markets.

Under these CfDs with a public entity, energy generators would be protected with minimum remuneration while it should be ensured that they operate and participate efficiently in the electricity markets and react to market circumstances. In high-price periods, they would have to pay back excess revenues, which can then be distributed to final customers, be invested to reduce electricity costs for final customers or used to develop distribution grids. Two-way CfDs can apply to investments in new power-generating facilities of wind, solar or geothermal energy, hydropower without reservoir and nuclear energy.

electricity

As for the gas market reform, the package sets out solid rules for the organisation of the natural gas market and establishes a strong framework for the development of the future hydrogen market, including dedicated hydrogen infrastructure. It contains specific rules for the transport, supply and storage of natural gas and hydrogen.

The package also calls for integrated and transparent network planning across the EU, under the principle of ‘energy efficiency first’ and with a forward-looking approach. Gas and hydrogen network operators will prepare a 10-year EU network development plan.

The new market rules also give the Council the power to declare a crisis, on the basis of a European Commission proposal, in the event of very high prices in wholesale electricity markets, or if there is a sharp increase in electricity retail prices.

In case of a declared electricity crisis, Member States can also take a series of actions, including already existing measures under the current EU rules, such as further reduction of electricity prices for vulnerable and disadvantaged customers. Member states should also prevent any undue distortion of the internal electricity market, including by ensuring a level-playing field for suppliers during the crisis period.

Member States will also be able to reinforce their measures to protect vulnerable and energy-poor customers, including banning disconnections. The reform also encourages energy-sharing schemes, in addition to already existing provisions on renewable energy communities and citizen energy communities.

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