A new EU electricity market design
to bolster the EU’s leadership in renewable energy
European Commission President Jean-Claude Juncker called in July 2014 for the European Union to
“become the world number one in renewable energies”.
The Commission clearly confirmed its political will in the February 2015 Communication on the Energy
Union1 signalling “a fundamental transformation of Europe's energy system” away from the current
centralised conventional energy system, based on fossil fuels and nuclear. The communication paves the
way for “a resilient Energy Union with an ambitious climate policy at its core (…) to give EU consumers households and businesses - secure, sustainable, competitive and affordable energy”.
The necessity to proceed with this vision is made more acute by the success of the COP21 conference in
Paris at the end of 2015 resulting in 195 governments agreeing on a new international climate treaty. One of
its aim is “to achieve a balance between anthropogenic emissions by sources and removals by sinks of
greenhouse gases in the second half of this century.” This global agreement clearly signals a global
transformation away from a fossil-fuel based economy and an increased level of political commitments
worldwide.
To this end, a reform of the EU electricity market must be tackled as a matter of priority. Europe currently
has an antiquated energy system, tailored to non-renewable, centralised and inflexible production within
national boundaries.
This framework effectively acts as a cap for renewables deployment limiting Europe’s ability to
transformation to a decarbonised power sector. The share of electricity produced by renewables could
grow from 28% today to 50% in 2030 contributing to the competitiveness of the European economy by
supplying inexpensive power.
1
European Commission’s communication, Energy Union Package (COM(2015) 80 final of 25 February 2015.
Reaping these benefits requires adjusting the market design to decentralised and variable power
production, thus sending the appropriate signals to remove uneconomic, polluting and inflexible assets
from the market. Getting the market design right today will determine whether the energy
transformation in Europe is achieved in the most cost-effective manner. While recalling the equally
important need for a better designed and more RES based market for thermal energy, the undersigned EU
renewable energy associations highlight the following key features as essential for a fully functioning
electricity market supporting the energy transformation with renewables (RES):
1. Ensuring RES participation to integrated markets in every timeframes;
2. Strengthening the role of prosumers and promotion of self-consumption;
3. Promoting and fully exploiting flexibility options for generation (including from dispatchable RES),
consumption and storage;
4. Providing investors with a stable and predictable regulatory framework, avoiding any retroactive
measures;
5. Carrying out an ETS reform which will provide a high and stable carbon price, thereby creating
market exit signals for carbon-intensive and artificially inefficient power plants and creating long
term investment signals for all abatement options;
6. Making sure Capacity Remuneration Mechanisms (CRMs) are used as a last resort option and only
after standardized regional system adequacy analysis;
7. Focusing on regional and de-centralised energy production and consumption; and
8. Analysing the opportunities to develop RES combined heat and power and other integrated energy
solutions (smart thermal grids, buildings and appliances).
In the move to a new electricity market design providing a true level playing field for all participants, EU
renewable energy associations regard the following policy instruments as a prerequisite to successfully
master the energy transformation:
1. Maintaining priority dispatch and balancing exemptions for renewables in regions with low
penetration rate and until flexibility in the system remains hampered by inflexible power
generation;
2. In line with internal energy market rules, more flexibility for Member States to choose the most
appropriate economic instruments, adapted according to market and technology maturity, specific
risk profiles and features;
3. Continued national dedicated frameworks for small and medium sized projects which should not
be exposed to auctioning schemes;
4. Progressive introduction of more market-based support instruments such as Feed-in-premium for
large-scale projects; and
5. Support for research, innovation and demonstration of next generation renewable energy
technologies.