EU Bodies Give Nod To Electricity Market Design Revision

• EU Council and EU Parliament have reached a provisional agreement over the revised EMD 
• It will end market caps and provide legal certainty to the solar sector with clear rules at EU level 
• The revisions also make way for exemptions to coal-fired power plants which the SPE says prolongs the bloc's dependence on this fossil-fuel 

Things seem to be speeding up in the European Union (EU) on the renewable energy front as the EU Council and EU Parliament reached a provisional agreement to reform the Electricity Market Design (EMD). It now needs to be endorsed and formally adopted by both the institutions. 

It follows the 2 EU bodies reaching a provisional agreement for the Energy Performance of Buildings Directive (EPDB) that gives a boost to rooftop solar development in the bloc (see 'Milestone' For Renewable Energy Deployment In EU).  

Revisions to the existing EMD were proposed by the European Commission in March 2023 (see Renewables To Get Boost With EU Electricity Market Design). 

EU solar PV industry body SolarPower Europe (SPE) has welcomed the move saying it offers a 'clear path forward for long-term investments into renewables.' 

Being reformed to reduce EU's dependence on Russian gas, and thus make electricity prices less dependent on volatile fossil fuel prices, the EMD also makes way for the following:  

• Businesses will be able to enter power purchase agreements (PPA) backed by member states ensuring the latter removes all barriers for the development of this market 
• Developers will be able to pick between contracts for difference (CfD) or PPA for their projects, or even choose both the options 
• Citizens will be able to choose dynamic pricing with multiple or combined electricity contracts 
• Citizens will be able to sell excess renewable electricity like from solar panels to their neighbors. This, the SPE says, is the first time that citizens get an enshrined right to energy sharing 
• 2-way CfD will apply to investments based on wind, solar, geothermal, hydropower without reservoir and nuclear energy .

"We are relieved to see an end to the current implementation of market caps, which has been fragmenting the EU market and harming renewable investments. Negotiators have given the solar sector much-needed legal certainty by setting clear rules at EU-level for declaring an emergency situation," said SPE Head of Regulatory Affairs Naomi Chevillard. 

Nonetheless, the 2 EU bodies have also agreed to 'make capacity mechanisms a more structural element of the electricity market. In addition, they agreed to introduce a potential and exceptional derogation from the application of the CO2 emission limit for already authorised capacity mechanisms, where duly justified.' 

The SPE is not happy with the decision as it prolongs Europe's dependency on coal. "Member States should be betting on, and investing in, clean flexibility of the future – like batteries or demand-side response – rather than the out-dated fossil 'baseload' of the past," added Chevillard. 

NGO Climate Action Network (CAN) Europe has also criticized the 'controversial compromise,' saying this will extend state support for old, polluting coal-fired power plants that do not meet the 2019 emission standards. It claims Poland led the charge on further coal subsidies with the backing of France, Bulgaria and Slovakia. 

"Backdoor deals to continue support for Europe's dirtiest coal-fired power plants in exchange for state support for nuclear, a slow and expensive technology to get off the ground, delays the fossil fuel phase out on two fronts," stated Coal and Nuclear Policy Expert at CAN Europe, Thomas Lewis. "Renewables, energy demand reduction, and system flexibility provide Europe the most effective path to meeting the Paris Agreement Goal, and should not have been sidelined during this reform." 

Recently, the SPE released its European Market Outlook for Solar Power 2023-2027 that pegs 2023 annual solar PV installations at 56 GW, and expects the same to grow by 11% in 2024 with 62 GW (see EU Solar PV Installations Reach 56 GW In 2023).