On October 17, the Energy Council adopted its General Approach on the Electricity Market Design in what is a significant step towards the creation of a stable framework that guarantees certainty for new investments in power generation.

Sustained growth of renewable power in the EU is required not only because of the 42.5% renewable energy target set in RED III or the imperative of accelerating electrification, but also because it is absolutely essential to foster hydrogen as a vector of decarbonisation of hard to abate sectors and as a provider of flexibility to the energy system. Hydrogen supply is conditioned upon the availability of affordable low carbon electricity. Hence, there is plenty of need for an optimal design of the electricity market that will guarantee long term investments in new renewable electricity facilities, while keeping it as affordable as possible.

Daniel Fraile, Chief Policy Officer at Hydrogen Europe, said: “We are very happy this agreement has been reached. We must move forward with certainty for big investments into new renewable generation, which will help to serve the growing needs to the hydrogen sector to support both the decarbonisation of hard to abate sectors and to provide flexibility needs to the power sector. We are happy the council has maintained the concepts presented by the Commission, which gives a stronger role to flexibility and storage solutions. In a system increasingly dominated by variable renewables, the need for flexibility will be paramount.”

This reform introduces state-backed guarantee schemes at market prices, private guarantees, and facilitates pooling demand for PPAs as well as two-way contracts for difference for new renewable energy projects, which will make the system less dependent on short term prices and will provide financial guarantees to back up RES deployment.  

The General Approach paves the way towards the beginning of trilogues with the Parliament and a potential deal on the file before the end of this year. It will be of utmost importance that the discussions between the three institutions factor in the importance of flexibility and storage – two features of the market design that can be offered by hydrogen. It is crucial that the final EMD is crafted in a way that rewards these capacities, for instance, through the capacity mechanisms (that Council decided to enshrine as permanent as opposed to temporary measures). 

Hydrogen can play a significant role in providing balancing services in this emerging new power market configuration. Indeed, as we move towards power systems increasingly dominated by intermittent renewable energy sources, the need for flexibility and storage will continue to grow.

For more information: Council press release