Regulation (EU) 2024/1747 of the European Parliament and of the Council of 13 June 2024 amending Regulations (EU) 2019/942 and (EU) 2019/943 as regards improving the Union’s electricity market design (Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 194(2) thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee (1),

Having regard to the opinion of the Committee of the Regions (2),

Acting in accordance with the ordinary legislative procedure (3),

Whereas:

(1) Very high prices and volatility in electricity markets have been observed since September 2021. As set out by the European Union Agency for the Cooperation of Energy Regulators (ACER) in its final assessment of the EU wholesale electricity market design of April 2022, this is mainly a consequence of the high price of gas, which is used as an input to generate electricity.

(2) The escalation of the Russian war of aggression against Ukraine, which is a Contracting Party of the Energy Community Treaty (4), and the related international sanctions since February 2022 have led to a gas crisis, have disrupted global energy markets, have exacerbated the problem of high gas prices, and have had a significant knock-on impact on electricity prices. The Russian war of aggression against Ukraine has also caused uncertainty on the supply of other commodities, such as hard coal and crude oil, used by power-generating installations. That uncertainty has resulted in a substantial additional increase in the volatility of electricity prices. The reduced availability of several nuclear reactors and the low hydropower output have further amplified the increase in electricity prices.

(3) As a response to that situation, the Commission, in its communication of 13 October 2021 on ‘Tackling rising energy prices: a toolbox for action and support’, proposed a toolbox of measures that the Union and its Member States may use to address the immediate impact of high energy prices on household customers and businesses, including income support, tax breaks, energy savings and storage measures and to strengthen resilience to future price shocks. In its communication of 8 March 2022 on ‘REPowerEU: Joint European Action for more affordable, secure and sustainable energy’, the Commission outlined a series of additional measures to strengthen the toolbox and to respond to rising energy prices. On 23 March 2022, the Commission also established a temporary State aid framework to allow certain subsidies to soften the impact of high energy prices.

(4) In its communication of 18 May 2022 the Commission presented its ‘REPowerEU plan’, which introduced additional measures focusing on energy savings, diversification of energy supplies, increased energy efficiency target and accelerated roll-out of renewable energy aiming to reduce the Union’s dependence on Russian fossil fuels, including a proposal to increase the Union’s 2030 target for gross final consumption of renewable energy to 45 %. Furthermore, the communication of the Commission of 18 May 2022 on ‘Short-Term Energy Market Interventions and Long-Term Improvements to the Electricity Market Design — a course for action’, in addition to setting out additional short-term measures to tackle high energy prices, identified potential areas for improving the electricity market design and announced the intention to assess those areas with a view to changing the legislative framework.

(5) In order to address, urgently, the energy price crisis and security concerns and to tackle the price hikes for citizens, the Union adopted several legal acts, including Regulation (EU) 2022/1032 of the European Parliament and of the Council (5), which established a strong gas storage regime and Council Regulation (EU) 2022/1369 (6), which provided for effective demand reduction measures for gas and electricity, Council Regulation (EU) 2022/1854 (7), which established price limiting regimes to avoid windfall profits in both gas and electricity markets, and Council Regulation (EU) 2022/2577 (8), which established measures to accelerate the permit-granting procedures for renewable energy installations.

(6) A well-integrated energy market, which builds on Regulations (EU) 2018/1999 (9), (EU) 2019/942 (10) and (EU) 2019/943 (11) of the European Parliament and of the Council, and Directives (EU) 2018/2001 (12), (EU) 2018/2002 (13) and (EU) 2019/944 (14) of the European Parliament and of the Council, together commonly referred to as the Clean energy for all Europeans package, adopted in 2018 and 2019 (the ‘Clean Energy Package’), allows the Union to reap the economic benefits of a single energy market in all circumstances, ensuring security of supply and sustaining the decarbonisation process to achieve the Union’s climate neutrality objective. Cross-border interconnectivity also ensures a safer, more reliable and efficient operation of power systems, and better resilience to short-term price shocks.

(7) Strengthening the internal energy market and achieving the climate and energy transition objectives require a substantial upgrade of the Union’s electricity network to be able to host vast increases of renewable generation capacity, with weather-dependent variability in generation amounts and changing electricity flow patterns across the Union, and to be able to address new demand such as electric vehicles and heat pumps. Investment in grids, within and across borders, is crucial to the proper functioning of the internal electricity market, including security of supply. Such investment is necessary to integrate renewable energy and demand in a context where they are located further apart than in the past and, ultimately, to deliver on the Union climate and energy targets. Therefore, any reform of the Union’s electricity market should contribute to a more integrated European electricity network, with a view to ensuring that each Member State reaches a level of electricity interconnectivity in accordance with the electricity interconnection target for 2030 of at least 15 % pursuant to Article 4, point (d)(1), of Regulation (EU) 2018/1999, that that interconnection capacity is used as much as possible for cross-border trade and that the Union’s electricity network and connectivity infrastructure are built or upgraded, such as the Union projects of common interest established pursuant to Regulation (EU) 2022/869 of the European Parliament and of the Council (15). Adequate connectivity should be provided to all Union citizens and undertakings as this can result in major opportunities for them to participate in the energy transition and the digital transformation of the Union. Special consideration should be given to the outermost regions referred to in Article 349 of the Treaty on the Functioning of the European Union (TFEU), which recognises their specific constraints and provides for the adoption of specific measures in their regard.

(8) The current electricity market design has, inter alia, helped the emergence of new and innovative products, services and measures on retail electricity markets, supporting energy efficiency and the uptake of renewable energy and enhancing choice to help consumers reduce their energy bills including through small-scale generation installations and emerging services for providing demand response. Building on and seizing the potential of the digitalisation of the energy system, such as active participation by consumers, is a key element of future electricity markets and systems in the Union. At the same time, there is a need to respect consumer choices and allow consumers to benefit from a variety of contractual offers, and to shield household customers from high prices during an energy crisis. Energy system integration is intended to be the planning and operation of the energy system as a whole, across multiple energy carriers, infrastructures and consumption sectors, by creating stronger links between them, in synergy with each other and supported by digitalisation with the objective of delivering secure, affordable, reliable and sustainable energy.

(9) In the context of the energy crisis, the current electricity market design has revealed a number of shortcomings and unexpected consequences linked to the impact of high and volatile fossil fuel prices on short-term electricity markets, which expose households and undertakings to significant price spikes and resulting effects on their electricity bills.

(10) A faster deployment of renewable energy and clean flexible technologies constitutes the most sustainable and cost-effective way of structurally reducing the demand for fossil fuels for electricity generation and enabling direct consumption of electricity through the electrification of energy demand and energy system integration. Due to their low operational costs, renewable sources can have a positive impact on electricity prices across the Union and reduce the consumption of fossil fuels.

(11) The changes to the electricity market design should ensure that the benefits from increasing renewable power deployment, and the energy transition as a whole, are brought to consumers, including the most vulnerable ones, and ultimately shield them from energy crises and avoid more household customers falling into an energy poverty trap. Those changes should mitigate the impact of high fossil fuel prices, in particular that of gas, on electricity prices, aiming to allow household customers and undertakings to reap the benefits of affordable and secure energy from sustainable renewable and low carbon sources in the longer term, as well as of energy efficient solutions in reducing overall energy costs, which may reduce the need for power grid and generation capacity expansion.

(12) The reform of the electricity market design aims to achieve affordable and competitive electricity prices for all consumers. As such, that reform should benefit not only household customers but also the competitiveness of the Union’s industries by facilitating the investment in clean technology that they require to meet their net zero transition paths. The energy transition in the Union needs to be supported by a strong clean technology manufacturing basis. Those reforms will support the affordable electrification of industry and the Union’s position as a global leader in terms of research and innovation in clean energy technologies.

(13) Well-functioning and efficient short-term markets are a key tool for the integration of renewable energy and flexibility sources into the electricity market and enable energy system integration in a cost-effective manner.

(14) Intraday markets are particularly important for the integration of variable renewable energy sources in the electricity system at the least cost as they give the possibility to market participants to trade shortages or surplus of electricity closer to the time of delivery. Since variable renewable energy generators are only able to accurately estimate their production close to the delivery time, it is crucial for them to maximise trading opportunities via access to a liquid market as close as possible to the time of delivery of the electricity. The gate closure time of the cross-zonal intraday market should therefore be shortened and set closer to real time in order to maximise the opportunities for market participants to trade shortages and surplus of electricity and contribute to better integrating variable renewable energy sources into the electricity system. Where that change creates security of supply risks and to allow for a cost-efficient transition to the shorter cross-zonal gate closure time, the transmission system operators should have the possibility to request a derogation, on the basis of an impact assessment and subject to approval by the regulatory authority concerned, in order to obtain an extension of the implementation timeline. That request should include an action plan with concrete steps towards the implementation of the new intraday cross-zonal gate closure time.

(15) It is therefore important for the intraday markets to adapt to the participation of variable renewable energy technologies such as solar and wind energy as well as to the participation of demand response and energy storage. The liquidity of the intraday markets should be improved with the sharing of the order books between market operators within a bidding zone, also when the cross-zonal capacities are set to zero or after the gate closure time of the intraday market. In order to ensure that order books are shared between nominated electricity market operators (NEMOs) in the day-ahead and intraday market coupling time frames, NEMOs should submit all orders for day-ahead and intraday products, and products with the same characteristics to the single day-ahead and intraday coupling and should not organise the trading of day-ahead or intraday products, or products with the same characteristics outside the single day-ahead and intraday coupling. To address the inherent risk of discrimination in the trading of day-ahead and intraday products inside and outside the single day-ahead and intraday coupling, and the consequent draining of liquidity in the Union’s coupled electricity markets, that obligation should apply to NEMOs, to undertakings which directly or indirectly exercise control over a NEMO, and to undertakings which are directly or indirectly controlled by a NEMO. To improve the transparency on the markets, the market participants should provide, where applicable, information by generation units without prejudice to the presentation of bids in accordance with the relevant framework in each Member State.

(16) In addition, short-term electricity markets should ensure that small-scale flexibility service providers can participate by lowering the minimum bid size.

(17) To ensure the efficient integration of electricity generated from variable renewable energy sources and to reduce the need for fossil-fuel based electricity generation in situations of regional or Union-wide electricity price crisis, it should be possible for Member States to request system operators to propose the procurement of a peak-shaving product enabling additional demand response in order to contribute to decreasing consumption in the electricity system. The proposal for a peak-shaving product should be assessed by the regulatory authority concerned as regards achieving a reduction of electricity demand and a reduction of the impact on wholesale electricity price during peak hours. As the peak-shaving product aims to reduce and shift the electricity consumption and in order to avoid increasing of greenhouse gas emissions, the activation of the peak-shaving product should not imply starting fossil fuel-based generation located behind the metering point. As the peak-shaving product is intended to be applied only in limited situations of regional or Union-wide electricity price crisis, its procurement may take place up to one week ahead of releasing additional demand response capacities. System operators should be able to activate the peak-shaving product before or within the day-ahead market time frame. Alternatively, it should be possible for the peak-shaving product to be activated automatically based on a pre-defined electricity price. In order to verify volumes of reduction of electricity consumption, the system operator should use a baseline reflecting the expected electricity consumption without the activation of the peak-shaving product, and should, after consulting market participants, develop a baseline methodology. That methodology should be approved by the regulatory authority concerned. ACER should assess the impact of using peak-shaving products on the Union electricity market, taking into account the need for peak-shaving products not to unduly distort the functioning of the electricity markets or to cause a redirection of demand response towards peak-shaving products, and should be able to issue recommendations to regulatory authorities to be taken into account in their assessment at national level. Furthermore, ACER should assess the impact of developing peak-shaving products on the Union electricity market under normal circumstances. On the basis of that assessment, the Commission should be able, where appropriate, to submit a legislative proposal to amend Regulation (EU) 2019/943 in order to introduce peak-shaving products outside electricity price crisis situations.

(18) In order to be able to actively participate in the electricity markets and to provide flexibility, consumers are progressively equipped with smart meters. However, in a number of Member States the roll-out of smart metering systems is still slow so it is imperative that Member States improve the conditions for the installation of smart metering systems, with the objective of reaching a full coverage as soon as possible. However, transmission system operators, distribution system operators and relevant market participants, including independent aggregators, should be able to use, upon the consent of the final customer, data from dedicated measurement devices, in accordance with Articles 23 and 24 of Directive (EU) 2019/944 and other relevant Union law, including data protection and privacy law, in particular Regulation (EU) 2016/679 of the European Parliament and of the Council (16). In addition, only in those cases where smart metering systems are not yet installed and in cases where smart metering systems do not provide for the sufficient level of data granularity, transmission system operators and distribution system operators, upon the consent of the final customer, should use data from dedicated measurement devices for the observability and settlement of flexibility services such as demand response and energy storage. Enabling the use of data from dedicated measurement devices for observability and settlement should facilitate the active participation of the final customers in the market and the development of their demand response. The use of data from those dedicated measurement devices should comply with quality requirements relating to the data.

(19) This Regulation establishes a legal basis for the processing of personal data in accordance with Regulation (EU) 2016/679. Member States should ensure that all principles and obligations relating to processing of personal data laid down in Regulation (EU) 2016/679 are met, including on data minimisation. Where the objective of this Regulation can be achieved without the processing of personal data, data controllers should rely on anonymised and aggregated data.

(20) Consumers and suppliers need effective and efficient forward markets to cover their long-term price exposure and decrease their dependence on short-term prices. To ensure that energy customers across the Union are able to fully benefit from the advantages of integrated electricity markets and competition across the Union, the Commission should assess the impact of possible measures to improve the functioning of the Union’s electricity forward markets such as the frequency of allocation, the maturity and the nature of long-term transmission rights, ways to strengthen the secondary market and the possible introduction of regional virtual hubs.