Today (14 December), a deal was agreed between the European Commission, Council, and Parliament on the Electricity Market Design, in what can be considered as a crucial step towards a more sustainable, resilient, and affordable electricity system.  

Hydrogen Europe welcomes the agreement, which offers an enhanced market design to tackle the fallout of the energy crisis and lays the foundation for massive decarbonisation of the European power system.  

The Electricity Market Design aims to enhance the roll-out of renewables and increase the amount of energy traded in long-term contracts to make the price less dependent on fossil fuel prices and variations on the wholesale market. The reform streamlines Power Purchase Agreements (PPAs) and introduces two-way Contracts for Difference (CFDs) for wind, solar, geothermal, hydropower without reservoir and nuclear energy. For the latter, Member States have flexibility in terms of redistributing revenues from CFDs– with the provisions for CFDs only kicking in after a transition period of three years (after entry into force of this legislation).  

The revamped market design also creates basis for better sector integration as it contains new and strong measures on flexibility. Some key aspects of the EMD that underscore this progressive shift include: 

• Establishment of national objectives for flexibility based on the needs at different timeframes (short term, monthly and seasonal) and with locational criteria, as well as an assessment of flexibility needs at EU’s level;  
• Creation of non-fossil flexibility support schemes to support energy storage technologies and demand response;  
• Transforming capacity mechanisms into a more structural element of the Electricity Market and eliminating their last-resort nature. These mechanisms could play an essential role in supporting hydrogen use in power plants likely to provide capacity services when the variable renewables are not there to satisfy the demand.  

Daniel Fraile, Chief Policy Officer at Hydrogen Europe, highlights the significance of this agreement: “This reform takes us one step closer to a net zero system. The inclusion of flexibility targets and the promotion of non-fossil flexibility support schemes in the new market design are the right strategic choice to accelerate the decarbonisation of the energy system. Hydrogen’s ability to provide essential flexibility, long-duration storage at scale and security of supply services in the power sector will be pivotal as we transition to a system dominated by renewable energy. “ 

For Hydrogen Europe, the EMD sets the EU on a path to a more integrated energy system, where the interplay between renewable sources and hydrogen will be key to ensuring a sustainable, reliant, and affordable energy for the European industry and its citizens. Now, we will be closely following its implementation, in particular when it comes to developing the methodology for the national flexibility reports – the elaboration of which has been entrusted to ENTSO-E. This will be a great opportunity to get closer towards common planning for infrastructure development between our two sectors.  

The provisional agreement reached today with the European Parliament now needs to be endorsed and formally adopted by both institutions. 

For more information: 

Council Press Release – Reform of electricity market design: Council and Parliament reach deal