Improving the Electricity Market Design for a Decarbonised and Sustainable Energy System

The European Commission’s proposal to revise the electricity market design shows much promise. Bellona believes a number of areas need to be strengthened for a more efficient and flexible energy system. 

  1. Ensuring Investment in Renewables: The proposal aims to provide long-term revenue streams for renewable energy projects through Power Purchase Agreements (PPAs), Contracts for Difference (CfDs), and forward markets, which Bellona supports. However, Bellona suggests that the revenues from certain contracts should be used to protect vulnerable and small consumers and promote energy efficiency measures that benefit households, small businesses, and the overall energy system. 
  2. Addressing Grid Infrastructure: Grids play a crucial role in integrating renewable energy sources. Bellona highlights the importance of recognising the grid’s role in integrating high levels of renewables by  ensuring a stable power supply, supporting flexibility services, and facilitating demand response activities. The reform presents an opportunity to streamline and shorten permitting procedures through a maximum duration, for industrial electricity users connecting to the grid. Including locational considerations in renewable energy contracts and flexibility support systems would also improve the placement of new renewable generation investments and prevent curtailment. SImilarly, expanding he scope of transmission access guarantee provisions to other renewable generation assets beyond offshore wind would ensure no renewable energy gets curtailed. 
  3. Efficient Use of Energy: Bellona supports transitioning away from fossil gas peakers but emphasises the need for efficient energy use. Comparing battery storage to hydrogen peakers, efficiency differences are significant. Market distortions caused by hydrogen subsidies should be considered when designing mechanisms for capacity remuneration. Separately supporting and rewarding short- and long-term non-fossil electricity storage solutions is important, and any support for using hydrogen in system balancing should adhere to rigorous low-carbon standards. 
  4. Encouraging Demand-Side Flexibility: Aligning demand-side response and storage with renewable energy availability is crucial. Bellona suggests making national objectives for demand-side response and storage mandatory to ensure their implementation. Clear and robust definitions of flexibility would minimise confusion and promote effective measures. Renewable support schemes should be accountable for securing demand-side flexibility, and mechanisms such as 24/7 guarantees of origin should be adopted to match flexible consumption with renewable electricity generation in real time. 

In conclusion, Bellona supports the reform of the European electricity market design but urges lawmakers to strengthen certain provisions. This will ensure a fair, efficient, and decarbonised energy system that maximises the opportunities presented by the energy transition. 

 Download here: Bellona Europa EMD Consultation Response

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