What can we expect from the EU’s reform of the internal electricity market design?

GC expert digital panel discussion looking at the commission’s consultation and what electricity market reform means for businesses and other players driving the EU’s energy transition.

The key discussion points from the event include:

• The Commission’s three-week consultation on reform of the EU’s electricity market design explores a wide range of policy options. The narrative of the consultation focuses on providing certainty to investors and protection to consumers, and on aligning the market design with the EU’s decarbonisation strategy. The formulation of the questions reflects the Commission’s thinking, e.g. the rollout of so-called 'contracts for difference' and 'power purchase agreements' is uncontested. Nevertheless, the consultation is likely to inform how strong the incentives for those contracts should be. 
• The Commission is more neutral on policy tools such as virtual hubs for new electricity generators, contracts for difference for existing energy assets, and the extension of the inframarginal revenue cap i.e. applying to renewables and low carbon energy suppliers, as implemented last year. As highlighted during our Q&A session, the consultation covers demand-response measures as well, such as demand-response requirements during peak hours. However, the short deadline to collect stakeholders’ views – roughly a quarter of the length normally offered - suggests the Commission’s proposal is already drafted. 
• The reform has been heavily politicised, so the Council will likely play a key role in shaping the proposal. Several member states have already been outspoken and circulated non-papers to promote their views for reform – including Spain, the Swedish Presidency of the Council, and France. Last year, member states also set a precedent for energy market intervention, as they adopted very interventionist market tools to act on energy price spikes, e.g. December’s gas price correction mechanism. This experience suggests that the Council will play a key role in shaping the final market reform proposal. 
• As highlighted during our Q&A session, within the European Parliament concerns and frustration have grown following the adoption of emergency energy measures without its consultation. Traditional disagreements between political parties are likely to transform into divisions based on national concerns and a lot of different parliamentary committees will want to be involved. Within the Commission, further disputes between the Commission President and its Commissioners for the Green Deal, Energy, the Internal Market and Competition should be expected, in the wider context of the rollout of the EU’s Green Deal Industrial Plan. 
• Businesses should contribute to the Commission’s consultation as part of their wider EU energy transition. Businesses should make sure to frame their contributions in the wider context of the Green Deal’s rollout, building on the agreed need for large investment in the energy transition. The current Commission will be focused on ensuring energy security and affordability ahead of next winter, while the long-term reform of the market is likely to be guided by the next Commission. Practically speaking, the consultation is a questionnaire. However, businesses should attach a contribution to their answers.