Electricity Market Design Revision

Overnight, EU policymakers reached an agreement on the revision of the Electricity Market Design. SolarPower Europe issued the following statement.

Naomi Chevillard, Head of Regulatory Affairs at SolarPower Europe (she/her) said: 

“We now have clear path forward for long-term investments into renewables. We are relieved to see an end to the current implementation of market caps, which has been fragmenting the EU market and harming renewable investments. Negotiators have given the solar sector much-needed legal certainty by setting clear rules at EU-level for declaring an emergency situation. 

The new market design will empower Europeans with some real tools for decarbonising and fighting future energy crises, thanks to solar’s low cost and versatility. 

Business will benefit from, and be encouraged to sign, power purchasing agreements, backed by national guarantees. For the first-time, citizens have an enshrined right to energy sharing – Europeans are now entitled to sell their excess solar to their neighbour or buy solar in their community at a lower cost. With energy sharing, we can support the grid while bringing solar to the homes which don’t have solar panels yet. 

The EMD also includes very positive provisions that will support a smoother connection to the grid and help Europe more than double its energy flexibility resources by 2030. Consumers will have the right to request a flexible grid connection agreement, under strict conditions. Grid operators will also need to develop an assessment of flexibility needs in their grid, based on an EU methodology. 

However, we can only regret the deal found on capacity remuneration mechanisms, prolonging Europe’s dependency on coal. Member States should be betting on, and investing in, clean flexibility of the future – like batteries or demand-side response – rather than the out-dated fossil ‘baseload’ of the past.”

NOTES

• As part of the deal, the Council agreed to leave out their proposal to extend inframarginal market caps.

• Negotiators decided to design criteria at EU-level for triggering an emergency, including average wholesale prices two and a half times higher than the average of the previous five years (excluding potential crisis years) and at least 180/MWh. 

• The text enshrines, for the first time, a right to share energy and sets a clear framework for all parties involved, including for large industrial consumers if provided so at national level. It will enable collective self-consumption (energy sharing) based on pioneering models in France, Spain and Portugal, and enable the creation of new business models to harvest the full potential of rooftop solar while supporting the grid.

• For larger consumers, the EMD mandates Member States to remove all barriers to the development of the Power Purchase Agreement (PPA) market and to design incentives, including state-backed guarantees. Developers will be able to choose whether they wish to receive state aid via CfDs, go the market route via PPA, or utilise both solutions for different parts of a single power plant. The Commission will further evaluate the need for publishing an EU PPA platform and/or standardised PPA contracts.

• The EMD also includes very positive provisions that will support a smoother connection to the grid as well as a growth of flexibility resources. Consumers will have the right to request a flexible grid connection agreement, under a strict monitoring framework developed by the regulator. 

• Flexible grid connections are grid connection agreements which limit at some times of the day the full injection of a solar PV. If well designed and voluntary, they can make flexible solar PV the standard for EU rooftops, and offer an option to connect for those consumers living in congested areas of the grid. 

• The EMD also requires grid operators to develop an assessment of flexibility needs in their grid, based on an EU methodology. This will put Europe on the track to more than double its flexibility capacity by 2030, as recommended by JRC.  

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