EU electricity market design reform

On 14 March 2023, European Commission launched two legislative initiatives: one to improve European electricity market design, the other to offer better protection against market manipulation on the wholesale energy market. These targeted reforms address shortcomings revealed by the current energy crisis, in particular price volatility and security of supply. They also introduce long-term changes necessary to achieve the Green Deal targets. EU electricity market design development started in 1996 as part of the integration of the energy market, itself driven by successive legislative packages, such as the clean energy for all Europeans package of 2019. Over the past decade, integrated electricity markets have generated a welfare benefit of around €34 billion per year. Despite this positive development, the implementation of these measures has been slower than anticipated on several fronts. Findings relating to their practical implementation and application shed light on the performance of electricity market design and underpin the revision examined in the present document. In addition to identifying room for improvement, these findings emphasise that continuous implementation of the existing measures remains crucial for reaping the benefits of an integrated electricity market. The Commission would like to see the reforms adopted before end of the year. Given the urgency, the proposals deviate from the interinstitutional better law-making principles. They lack an evaluation that would have analysed the performance of the existing market design and an impact assessment that would have examined the economic, social and environmental impacts of possible policy options. Instead, the rationale behind the proposed interventions and related evidence is explained in a Commission staff working document.