EU reached an agreement on the electricity market reform

The reform is designed to make the price of electricity more independent of the cost of gas

The European Council reached an agreement (general approach) on the proposal to make changes to the block’s electricity market structure. It is stated in the notification of the institution.

The reform aims to make the price of electricity more independent of the price of fossil fuels and provide better protection for consumers against future crises. In addition, the block will accelerate the introduction of renewable energy sources.

The reform aims at stable long-term electricity markets by encouraging power purchase agreements (PPAs), generalizing bilateral contracts for difference (CfDs) and improving forward market liquidity.

According to The Corner, EU energy ministers have broken the deadlock caused by a row between France and Germany over development subsidies from CfD contracts. As a concession to France, it will now be possible to decide on the application of CfD contracts to investments in the substantial re-equipment of existing power plants, including nuclear ones, by increasing their capacity or extending their operational life.

As a concession to Germany, it states that CfDs must be subject to certain development rules defined by the European Commission. These rules must ensure that any redistribution of income «does not create excessive distortions of competition and trade in the internal market».

The agreement, agreed by the EU energy ministers, still needs to be discussed with the members of the European Parliament regarding the final form of the legislation. The reconstruction of the design of the electricity market was proposed by the European Commission in March 2023 in order to curb the sharp rise in energy prices as a result of the invasion of the Russian Federation into Ukraine.

As GMK Center reported earlier, electricity prices in Europe in September have grown amid increased demand. In addition, gas prices rose at the end of September and at the beginning of October due to supply reduction and geopolitical risks.