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An integrated EU energy market is the most efficient way to ensure secure, sustainable and affordable energy supplies in the member states. Due to common energy market rules and cross-border infrastructure, energy can be produced in one EU country and delivered to consumers in another. Boosting competition, improving the renewables and allowing consumers to choose energy suppliers keeps prices in check.
European electricity market
The share of electricity produced by renewable energy sources (predominantly solar and wind) is expected to grow from 37 percent in 2020 to more than 60 percent by 2030; already in 2022, renewables made up over 41 percent of EU’s gross electricity consumption according to Eurostat.
At the same time, electricity must also be produced and delivered in sufficient quantities when there is no wind or sun. Markets need to adapt to better integrate renewable energies and attract investment in fossil-free flexible technologies, such as demand side response and energy storage, that can complement variable energy production.
hey must also provide the right incentives for consumers to become more active and contribute to keeping the electricity system stable. The EU electricity market needs to be transparent and efficiently monitored to ensure open and fair competition and protect against market abuse and manipulation.
High and volatile energy prices and serious concerns about security of supply in 2022, forced the member states’ heads of government to call on the Commission to work swiftly on the structural reform of the electricity market to help Europe secure its energy sovereignty and achieve climate neutrality.
To boost renewables, better protect consumers and enhance industrial competitiveness, the Commission proposed a reform of the current electricity market rules in March 2023, as part of the Green Deal Industrial Plan, GDIP.
On GDIP in: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-plan_en
The new electricity market design rules were adopted on 21 May 2024 and entered into force on 16 July 2024; they include the amending Directive 2024/1711 and the Regulation 2024/1747. Source: https://energy.ec.europa.eu/topics/markets-and-consumers/electricity-market-design_en
Under the Treaties, the EU member states are free to determine their energy mix, as well as the conditions for exploiting their energy resources and the general structure of their energy supply; besides, the decision to promote nuclear energy is also in the national competence.
State aid for nuclear energy can be assessed and approved directly under Article 107(3)(c) TFEU, which enables EU states to support the development of certain economic activities under certain conditions. The support should remain necessary and proportionate and not adversely affect trading conditions to an extent contrary to the common interest.
Following the entry into force of the new EU-wide electricity market design rules in July 2024, the Commission also assesses compliance of the national measures with the principles set out in Regulation 2024/1747.
Energy sector’s modernization
Since 2013, electricity producers have been obliged to purchase all the allowances they need to generate electricity. Nevertheless, in accordance with Article 10c of Directive 2003/87/EC, some EU member states have the option of providing transitional free allocation for the modernisation of the energy sector for the period from 2021 to 2030.
Three EU states have chosen to use that option; given the need for rapid decarbonisation, especially in the energy sector, these member states should only be able to provide this transitional free allocation for investments carried out until 31 December 2024. They should be able to add any remaining allowances for the period from 2021 to 2030 that are not used for such investments, in the proportion they determine, to the total quantity of allowances that these states receives for auctioning, or use them to support investments within the framework of the Modernisation Fund.
With the exception of the deadline for notification thereof, allowances transferred to the Modernisation Fund should be subject to the same rules concerning investments that are applicable to the allowances already transferred pursuant to Article 10d(4) of Directive 2003/87/EC.
To ensure predictability and transparency with regard to the amount of allowances available either for auctioning or for the transitional free allocation, and with regard to the assets managed by the Modernisation Fund, the EU member states should have informed the Commission of the amounts of remaining allowances to be used for each purpose, respectively, by 15 May 2024.
The scope of the Modernisation Fund should be aligned with the most recent climate objectives of the Union by requiring that investments are consistent with the objectives of the European Green Deal and Regulation 2021/1119, and eliminating the support to any investments related to energy generation based on fossil fuels, except as regards the support for such investments with revenue from allowances voluntarily transferred to the Modernisation Fund in accordance with Article 10d(4) of Directive 2003/87/EC.
In addition, limited support for such investments should continue to be possible with revenue from the allocations referred to in Article 10(1) of that Directive under certain conditions, in particular where the activity qualifies as environmentally sustainable under Regulation 2020/852 of the European Parliament and of the Council, and as regards the allowances auctioned until 2027. For the latter category of allowances, the downstream uses of non-solid fossil fuels should, in addition, not be supported with revenue from allowances auctioned after 2028.
Furthermore, the percentage of the Modernisation Fund that needs to be devoted to priority investments should be increased to 80 % for the Modernisation Fund allowances transferred in accordance with Article 10d(4) of Directive 2003/87/EC and referred to in Article 10(1) of that Directive, and to 90 % for the additional amount of 2,5 % from the Union-wide quantity of allowances.
Energy efficiency including in industry, transport, buildings, agriculture and waste; heating and cooling from renewable sources; as well as support for households to address energy poverty, including in rural and remote areas, should be included within the scope of the priority investments. In order to increase transparency and better assess the impact of the Modernisation Fund, the Investment Committee should report annually to the Climate Change Committee on experience with the evaluation of investments, in particular in terms of emission reductions and abatement costs.
Directive 2018/410 introduced provisions relating to the cancellation by the EU member states of allowances from their auction volume in respect of closures of electricity-generation capacity in their territory. In view of the increased climate ambition of the Union and the resulting accelerated decarbonisation of the electricity sector, such cancellation has become increasingly relevant.
Therefore, the Commission is going to assess whether the use by the member states of cancellation can be facilitated by amending the relevant delegated acts adopted pursuant to Article 10(4) of Directive 2003/87/EC.
Source: https://eur-lex.europa.eu/eli/dir/2023/959/oj