Electricity market reform marks key milestone in EU’s energy transition

The European Commission presented today its electricity market reform proposals, which will see changes made to both the Electricity Regulation and the Electricity Directive.  

The Commission is proposing to strengthen the market mechanisms to send stronger long-term signals for investments into renewable and nuclear generation technologies, storage and demand response, as well as stronger safeguards to protect electricity consumers from high price and price volatility.

“Hydrogen Europe commends the Commission’s forward looking electricity market reform,” said Daniel Fraile, Chief Policy Officer of Hydrogen Europe.

“The possibility to combine both contract-for-difference and power purchase agreements (PPAs) will be hugely beneficial for renewable hydrogen producers who depend on these PPAs to prove the renewable character of their hydrogen. The proposed obligation for Members States to regularly assess their flexibility needs is also much welcome because it will highlight the need to deploy long-term storage solutions where hydrogen is poised to play a fundamental role,” he added.

The Commission’s key proposals are:

• The inclusion of two-sided contracts-for-difference (CfD) as a voluntary mechanism, where if market prices rise above the agreed strike price, the difference will be redistributed among electricity consumers to reduce their bills.
• The option for power producers to combine CfDs with long-term power purchase agreements (PPA) – allowing them to benefit from the security of state support and dynamic market-based contract with private offtakes.
• Member States will also have to introduce instruments to support the uptake of PPAs including guarantee schemes, to reduce the financial risks associated to off-taker payment default.
• Members States have the option to introduce new, or adapted, market-based support schemes to promote storage and demand response, which could lead to the incentivisation of hydrogen storage for power generation

Hydrogen Europe calls on the European Parliament and Council to maintain this flexible and forward-looking approach to market reform, which will allow for the propagation of more renewable energy and clean hydrogen solutions.

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For more information:

• European Commission press corner: Commission proposes reform of the EU electricity market design to boost renewables, better protect consumers and enhance industrial competitiveness
• Hydrogen Europe's web article: A new electricity market for Europe