The recent proposal by the European Commission on the revision of the electricity market design has been overall welcomed by Eurelectric. The proposal focuses on enhancing customer choices and boosting long-term contracts and hedging opportunities to encourage investment in renewable energy sources and low carbon technologies. However, we have identified the following five key issues that need to be addressed to ensure the proposal's success.
Firstly, the focus on long-term contracts and markets is appreciated, but the design needs to be adequate to allow long-term instruments to complement each other. Additionally, retroactive changes should be avoided, and measures facilitating the approval and long-term implementation of capacity mechanisms should be considered.
Secondly, enhancing forward market liquidity is essential, and quick-wins based on the current set-up should be implemented. Collateral requirements should be addressed, and untested solutions like virtual hubs should be avoided.
Thirdly, the right balance between customer protection and supply regulation should be struck. Stress tests and reporting requirements should be encouraged instead of normalising hedging strategies and regulating supply offers to the detriment of retail competition and customers' choice.
Fourthly, grid investment and modernisation are necessary for the energy transition, and tariff design should provide the right incentives to system operators. National regulatory barriers should be removed to boost investment.
Finally, flexibility potential should be unlocked in a technology-neutral and market-based manner. All flexibility options should be considered, and flexibility support should be embedded in existing markets and capacity mechanisms where they exist.
In conclusion, the European Commission's proposal is a step in the right direction, but the five key issues identified by Eurelectric need to be addressed to ensure its success.
In this document, you will find:
- Our priority amendments targeting the five key issues above mentioned;
- Accompanying amendment proposals on those five key issues and other relevant provisions;
- Amendment proposals on the recitals.