EU Proposes Power Market Reform Draft: Promoting Renewable Energy And Stabilizing Investment

The European Commission has published a draft proposal to reform electricity market rules to address concerns about short-term electricity price fluctuations for residents, industry, and investors. The market reform proposal involves amendments to several regulations and directives aimed at reducing the dependence of electricity prices on fossil fuel prices while promoting the development of non-fossil fuel flexibility services and enhancing consumer protection.

In order to improve short-term market efficiency, the draft proposes to adjust the trading time and scale to increase market liquidity and competition. Especially for the non-dispatchability of renewable energy power generation, it is recommended to set the cross-regional intraday market closing time closer to real-time to increase the opportunities for renewable energy to participate in the market. In addition, it is proposed to reduce the minimum bid size for day-ahead and intraday market transactions to provide more trading opportunities for flexible resources such as small-scale renewable energy and energy storage.

For long-term investment, the draft proposes a series of measures. First, renewable energy generators are encouraged to enter into long-term power purchase contracts and government-mandated contracts for difference to reduce short-term price volatility. By establishing a guarantee mechanism and improving evaluation standards, etc., the risk of long-term power purchase contract performance is reduced, and the development of the long-term power purchase contract market is promoted. In addition, the draft reform proposes to introduce a low-carbon capacity compensation mechanism to incentivize investment in non-fossil fuel flexible resources by modifying the rules of the capacity market. This will help ensure flexibility support in the electricity system and facilitate the expansion of renewable energy capacity.
To protect households and SMEs, the draft reforms propose fixed-price retail contracts that reduce energy costs and provide stability and predictability. In addition, during the state of emergency, the draft proposes price intervention for households and small and medium-sized enterprises to ensure the demand for power supply and the stable operation of the electricity market.

The draft market reform aims to promote the sustainable development of the electricity market, reduce energy costs, increase the share of renewable energy, and improve market transparency and stability. The European Commission will work with member states and relevant stakeholders to promote the implementation of this draft, with a view to achieving a more sustainable and competitive electricity market in the future.

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