The European Commission has proposed a major reform of the EU’s electricity market design to accelerate the adoption of renewable energy and phase out gas.

The reform measures are aimed at incentivizing longer-term contracts with non-fossil power production and bringing more clean, flexible solutions into the system to compete with gas, such as demand response and storage.

The commission would make changes to several pieces of EU legislation, including the Electricity Regulation, the Electricity Directive, and the REMIT Regulation.

The measures are intended to make consumer bills less dependent on volatile fossil fuel prices, protect consumers from price spikes and potential market manipulation, and make the EU’s industry clean and more competitive.

The reform is intended to decrease the impact of fossil fuels on electricity bills and ensure that the lower cost of renewables gets reflected there. The measures are expected to boost open and fair competition in the European wholesale energy markets by enhancing market transparency and integrity.

Building a renewables-based energy system will be crucial to lower consumer bills and ensure a sustainable and independent energy supply to the EU, in line with the European Green Deal and the REPowerEU Plan.

“Renewable energy will increasingly be the go-to resource for European citizens and industries in the future. Renewables are our ticket to energy sovereignty and ending our dependence on fossil fuels. We need to update our market design to ensure that this transition happens as quickly as possible and that consumers can benefit from the lower costs of renewables,” said Frans Timmermans, Executive Vice-President for the European Green Deal.

This reform, part of the Green Deal Industrial Plan, will allow the European industry access to a renewable, non-fossil, and affordable power supply, a key enabler of decarbonization and the green transition. The deployment of renewables will need to triple by the end of this decade for Europe to achieve its energy and climate targets.

Under the proposal, rules on sharing renewable energy are also being revamped. Consumers can invest in wind or solar parks and sell excess rooftop solar electricity to neighbors, not just to their suppliers.

Public support for new investments in renewable and non-fossil electricity generation will be two-way Contracts for Difference (CfDs), and excess revenues will be channeled to consumers. The reforms also include obligations to facilitate renewables integration into the system, enhance predictability for generation, and ensure competitive markets and transparent price-setting.

The EU has had an efficient, well-integrated electricity market for over twenty years. However, the energy crisis spurred by Russia’s invasion of Ukraine has highlighted the need to adapt the electricity market to better support the green transition and offer energy consumers, households, and businesses widespread access to affordable renewable and non-fossil electricity.

The European Parliament and the Council will discuss the proposed measures before they come into force.

The Commission in February presented the Green Deal Industrial Plan to enhance the competitiveness of Europe’s net-zero industry and support the fast transition to climate neutrality.

Recently, the EU adopted a new Temporary Crisis and Transition Framework to support measures in sectors that are key for the transition to a net-zero economy in line with the Green Deal Industrial Plan.