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Council of the

European Union

Brussels, 19 December 2023

(OR. en)

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ENER 712

ENV 1524

CLIMA 663

COMPET 1295

CONSOM 498

FISC 301

CODEC 2543

Interinstitutional File:

2023/0077(COD)

NOTE

From:

General Secretariat of the Council

To:

Permanent Representatives Committee

No. Cion doc.:

7440/23 + ADD1

Subject:

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND

OF THE COUNCIL amending Regulations (EU) 2019/943 and (EU)

2019/942 as well as Directives (EU) 2018/2001 and (EU) 2019/944 to

improve the Union’s electricity market design

- Analysis of the final compromise text with a view to agreement

I. INTRODUCTION

1. On 14 March 2023, the Commission presented a proposal for the Regulation to improve the

Union’s electricity market design (EMD Regulation), together with the Regulation to improve

the Union’s protection against market manipulation in the wholesale energy market (REMIT

Regulation). The EMD Regulation amends the Electricity Directive 2019/944 and the Electricity

Regulation 2019/943, together with targeted changes in the Renewables Directive 2018/2001 and

the ACER Regulation 2019/942.

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2. The EMD proposal follows the very high prices and volatility in the electricity markets observed

in 2021 and 2022, and is based on three pillars – to protect consumers, to enhance stability and

predictability of the costs of energy and thereby contribute to the competitiveness of the EU

economy, and to boost new energy investment.

3. The European Council on 23 March and 26-27 October 2023 called on the co-legislators to reach

a prompt agreement on the reform of the Electricity Market Design adoption by the end of 2023.

4. In the European Parliament, the Committee on Industry, Research and Energy (ITRE) is the

leader for the file. The rapporteur is MEP Nicolas Gonzalez Casares (S&D, Spain). The

Parliament adopted its report on the EMD Regulation in Plenary on 14 September 2023.

5. The European Economic and Social Committee adopted its opinion on the EMD Regulation on

14 June 2023, while the European Committee of the Regions adopted its opinion on 6 July 2023.

II. INTERINSTITUTIONAL NEGOTATIONS - STATE OF PLAY

1. The TTE (Energy) Council on 17 October 2023 agreed on a General Approach on the above-

mentioned EMD Regulation proposal. The first interinstitutional trilogue took place on 19

October 2023 and subsequently, a second trilogue was held on 16 November. In addition to the

trilogues, intense discussions have taken place at technical meetings.

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2. The third (and last) trilogue was held on 13 December 2023 and a provisional agreement was

reached between the co-legislators, resulting in the final compromise text as set out in the

Annexes to this note. The discussion between the Council and the Parliament focused on the

remaining political issues, mainly: Direct price support schemes in the form of two-way contracts

for difference (CfDs) (Article 19b Electricity Regulation 2019/943); Protection from

disconnection for vulnerable customers (Article 28a Electricity Directive 2019/944); Declaration

of an electricity price crisis (Article 66a Electricity Directive 2019/944); Capacity renumeration

mechanisms (CRMs) (Article 21, 22, 64 and 69 Electricity Regulation 2019/943); and Power

Purchase Agreements (PPAs) (Article 19a Electricity Regulation 2019/943).

3. Since the third trilogue, work has continued at technical level between the Parliament and the

Presidency to adapt the texts to the political agreement, resulting in the final compromise texts as

set out in the Annexes to this note.

III. MAIN ELEMENTS OF THE COMPROMISE

1. For reasons of legal certainty and clarity, Articles 2 and 3 of the proposed Electricity Market

Regulation, which amend Directives (EU) 2018/2001 and (EU) 2019/944, have been split from

that Regulation and are now a self-standing Directive, in line with the General Approach. This is

a legal and technical adjustment which does not affect the substantial provisions of the proposals.

2. On the key political issues, the provisional agreements are the following:

(a) Direct price support schemes in the form of two-way Contracts for Difference (CfDs)

(Article 19b Electricity Regulation 2019/943). The Presidency and the European

Parliament maintained the core elements of the General Approach. The agreed compromise

keeps CfDs as mandatory only for investments in new power-generating facilities. The

scope of direct price support schemes has been broadened with the inclusion of a reference

to “equivalent schemes with the same effects”, while the design criteria have been

maintained as in the General Approach.

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(b) Capacity renumeration mechanisms (CRMs) (Articles 21, 22, 64 and 69 Electricity

Regulation 2019/943). The Presidency managed to keep the essence from the General

Approach making capacity mechanisms a structural element of the electricity market design

and envisaging the streamlining of procedures based on the proposals to be presented by the

Commission. Concerning the derogation from the CO2 emissions limit for existing capacity

mechanisms, the compromise proposal maintains the text from the General Approach, with

an assessment and autorhization by the Commission, adding that the request for the

derogation shall be accompanied by a report containing and assessment of the impact of the

derogation in terms of greenhouse gas emissions and a plan to procure the necessary

replacement capacity in line with the indicative national trajectory for the overall share of

renewable energy, among other aspects.

agreement forsees a balanced approach for the uptake of PPAs by preserving the

technological neutrality while simultaneously underlining the role of renewables.

References to the promotion of PPAs protecting competition and liquididy of electricity

markets have been complemented with a cross-border dimension. In addition, guarantee

schemes for PPAs backed by Member States shall include provisions to avoid lowering the

liquidity in electricity markets and shall not provide support to the purchase of generation

from fossil fuels. Member States may decide to limit those guarantee schemes to the

exclusive support of the purchase of new renewable generation.

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(d) Protection from disconnection for vulnerable customers (Article 28a Electricity

Directive 2019/944). Member States shall ensure that vulnerable and energy poor

customers are fully protected from electricity disconnections by taking the appropriate

measures, including the prohibition of disconnections or other equivalent actions. The

agreement ensures enough flexibility for Member States and includes a catalogue of

possible measures with the aim to avoid consumer’s disconnections. The definition of

energy poverty is incorporated in the electricity framework with a reference to the new

Energy Efficiency Directive 2023/1791.

(e) Declaration of an electricity price crisis (Article 66a Electricity Directive 2019/944).

The Article establishes that the Council, based on a proposal from the Commisison, may

decide on the declaration of an electricity price crisis. The Commission will make this

proposal when the conditions are met, namely a high average wholesale electricity prices

with a minimum threshold of 180 Euros per Megawatt hour, or an increase in retail prices

in the range of 70%. Once a crisis has been declared, Member States would be able to apply

price interventions targeting households, including vulnerable and energy poor customers,

and Small and Medium Enterprises.

(f) Energy Sharing (Article 15a Electricity Directive 2019/944). The right to participate in

energy sharing shall apply to Small and Medium Enterprises (SMEs) and households,

within the same bidding zone or a more limited geographical area as determined by the

Member State. Member States may decide to apply this right also to large electricity

customers. The conditions to apply the right to share energy, and the roles and

responsibilities of the parties involved are set, including with regard to the energy sharing

organizer that active customers may appoint as third party to facilitate their right to share

energy. A general obligation to make the electricity shared by projects owned by public

authorities accessible to vulnerable and poor customers is included, with a margin of

manoeuvre for its application by Member States at national level to promote that the

amount of this accessible energy is at least 10% on average of the energy shared.

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(g) Day ahead, intraday and forward markets (Articles 7, 8, 9 and 59 Electricity

Regulation 2019/943). According to Article 7, Transmission system operators (TSOs) and

nominated market operators (NEMOs) shall jointly organise the management of the

integrated day-ahead and intraday markets and shall cooperate at Union level or at a

regional level in order to maximise the efficiency and effectiveness of Union electricity

day-ahead and intraday trading. Different governance options are envisaged in the scope of

the corresponding network codes in Article 59. According to Article 8, from 1 January

2026, the intraday cross-zonal gate closure time shall not be more than 30 minutes ahead of

real time, with possible derogations subject to a justification by the TSOs and authorization

by the national regulatory authorities (NRAs). Article 9 establishes that within 18 months

from the entry into force of this amending Regulation, the Commission shall assess the

impact of possible measures to achieve the objective of Union’s forward market comprising

the necessary tools to improve the ability of market participants to hedge price risks in the

internal electricity market.

(h) Flexibility provisions (Articles 19c-19f of Electricity Regulation 2019/943). The

regulatory authority, or another authority or entity designated by a Member State, shall

adopt a report on the estimated needs for flexibility for a period of at least the next 5 to 10

years at national level. This exercise has to be carried out every two years based on the

information provided by electricity transmission and distribution system operators. ACER

shall issue a report analysing them and providing recommendations on issues of cross-

border relevance. In addition, Member States will establish one single indicative target at

national level for non-fossil flexibility allowing for different types or resources, with a

focus on the contributions by demand response and energy storage. The Commission may

draw up a Union strategy on demand response and energy storage that is consistent with the

Union's 2030 targets for energy and climate. Finally, Member States may design support

schemes for non-fossil flexibility resources to achieve their targets.

(i) Derogations (Article 64 Electricity Regulation 2019/943). The final compromise reflects

targeted derogations for the Baltic countries and Cyprus.

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(j) Revision clause (Article 69 in Electricity Regulation 2019/943 and Article 60

Electricity Directive 2019/944): By 30 June 2026, the Commission shall review the

Electricity Regulation and submit a comprehensive report on the basis of that review,

accompanied by a legislative proposal where appropriate. Elements to be assessed include

the effectiveness of the structure and functioning of short-term electricity markets, as well

as their potential inefficiencies and possible remedies and tools to be applied in crisis or

emergency situations. The Electricity Directive will be reviewed in December 2025.

IV. CONCLUSIONS

1. The Permanent Representatives Committee is invited to:

a) confirm the agreement on the final compromise texts as set out in the Annexes to this note,

in view of reaching an agreement at first reading with the European Parliament;

b) authorise the Presidency to inform the European Parliament that, should the European

Parliament adopt its positions at first reading, in accordance with Article 294 paragraph 3

of the Treaty, in the form set out in the texts contained in the Annexes to this note (subject

to revision by the lawyer linguists of both institutions), the Council will, in accordance with

Article 294, paragraph 4 of the Treaty, approve the European Parliament’s positions at first

reading and the acts shall be adopted in the wording which corresponds to the European

Parliament’s positions.

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ANNEX I

2023/0077 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

amending Regulations (EU) 2019/943 and (EU) 2019/942 ▌ to improve 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,

Having regard to the opinion of the Committee of the Regions,

Acting in accordance with the ordinary legislative procedure,

Whereas:

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(1) Very high prices and volatility in electricity markets have been observed since September

2021. As set out by the European Agency for the Cooperation of Energy Regulators

(‘ACER’) in its April 2022 assessment of EU wholesale electricity market design

, 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 military aggression against Ukraine, a Contracting Party of the

Energy Community, and related international sanctions since February 2022 have led to a

gas crisis, disrupted global energy markets, exacerbated the problem of high gas prices, and

have had significant knock-on impacts on electricity prices. The Russian invasion of

Ukraine has also caused uncertainty on the supply of other commodities, such as hard coal

and crude oil, used by power-generating installations. This has resulted in substantial

additional increases in the volatility of price levels of electricity. The reduced availability of

several nuclear reactors and the low hydropower output further amplified the increase in

electricity prices.

European Union Agency for the Cooperation of Energy Regulators, ACER’s Final

Assessment of the EU Wholesale Electricity Market Design, April 2022.

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(3) In response to this situation, the Commission presented in October 2021 the

Communication entitled “Tackling rising energy prices: a toolbox for action and support”

which contained a toolbox of measures that the Union and its Member States may use to

address the immediate impact of high energy prices on households and businesses, including

income support, tax breaks, energy savings and storage measures ▌ and to strengthen

resilience against future price shocks. In its Communication of 8 March 2022 entitled

‘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 regime to allow certain subsidies to soften the impact of high energy

prices.

(4) On 18 May 2022 the Commission presented the REPowerEU plan

that introduced

additional measures focusing on energy savings, diversification of energy supplies,

increased energy efficiency target and accelerated roll-out of renewable energy aiming at

ending the Union’s dependency on Russian fossil fuels, including a proposal to increase the

Union’s 2030 target for renewables to 45%. Furthermore, the Communication on Short-

Term Energy Market Interventions and Long-Term Improvements to the Electricity Market

Design

, 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 these areas with a view to changing the legislative framework.

Communication from the Commission to the European Parliament, the European Council,

the Council, the European Economic and Social Committee and the Committee of the

Regions - REPowerEU: Joint European Action for more affordable, secure and sustainable

energy, ▌

Communication from the Commission Temporary Crisis Framework for State Aid measures

to support the economy following the aggression against Ukraine by Russia C 131 I/01,

C/2022/1890.

Communication from the Commission to the European Parliament, the European Council,

the Council, the European Economic and Social Committee and the Committee of the

Regions - REPowerEU Plan, COM(2022)230.

Communication from the Commission to the European Parliament, the Council, the

European Economic and Social Committee and the Committee of the Regions - Short-Term

Energy Market Interventions and Long Term Improvements to the Electricity Market

Design – a course for action, COM(2022) 236 final.

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(5) In order to address urgently the price crisis and security concerns and to tackle the price

hikes for citizens, the Union adopted several legal acts, such as Regulation (EU)

2022/1032 of the European Parliament and of the Council

establishing a strong gas

storage regime

, Council Regulation (EU) 2022/1369

providing effective demand

reduction measures for gas and electricity

, Council Regulation (EU) 2022/1854

establishing price limiting regimes to avoid windfall profits in both gas and electricity

markets

and Council Regulation (EU) 2022/2577

establishing measures to accelerate

the permit-granting procedures for renewable energy installations

Regulation (EU) 2022/1032 of the European Parliament and of the Council of 29 June

2022 amending Regulations (EU) 2017/1938 and (EC) No 715/2009 with regard to gas

storage (Text with EEA relevance), OJ L 173OJ L 173, 30.6.2022, p17.

▌ Regulation (EU) 2022/1369 of 5 August 2022 on coordinated demand-reduction

measures for gas, OJ L 206 and Council Regulation (EU) 2022/1854 of 6 October 2022

on an emergency intervention to address high energy prices, OJ L 2612022/1032 of the

European Parliament and of the Council of 29 June 2022 amending Regulations (EU)

2017/1938 and (EC) No 715/2009 with regard to gas storage (Text with EEA relevance),

OJ L 173

Council Regulation (EU) 2022/1369 of 5 August 2022 on coordinated demand-reduction

measures for gas, OJ L 206 and Council Regulation (EU) 2022/1854 of 6 October 2022

on an emergency intervention to address high energy prices, (OJ L 206, 8.8.2022, pOJ L

261. 1)

Council Regulation (EU) 2022/2577 of 22 December 2022 laying down a framework to

accelerate the deployment of renewable2022/1369 of 5 August 2022 on coordinated

demand-reduction measures for gas, OJ L 206 and Council Regulation (EU) 2022/1854

of 6 October 2022 on an emergency intervention to address high energy prices, OJ L 261,

OJ L 335, 29.12.2022.

Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention to

address high energy prices (OJ L 261I, 7.10.2022, p. 1)

Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention to

address high energy prices, OJ L 261.

Council Regulation (EU) 2022/2577 of 22 December 2022 laying down a framework to

accelerate the deployment of renewable energy (OJ L 335, 29.12.2022, p.36).

Council Regulation (EU) 2022/2577 of 22 December 2022 laying down a framework to

accelerate the deployment of renewable energy, OJ L 335, 29.12.2022.

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(6) A well-integrated energy market which builds on the Clean energy for all Europeans

package

adopted in 2018 and 2019

(“Clean Energy Package") should allow 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 climate

neutrality objective. Cross-border interconnectivity also ensures a safer, more reliable and

efficient operation of the power system, and better resilience to short-term price shocks.

Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11

December 2018 on the Governance of the Energy Union and Climate Action, (OJ L 328,

21.12.2018, p. 1 1); Directive (EU) 2018/2001 of the European Parliament and of the

Council of 11 December 2018 on the promotion of the use of energy from renewable

sources (recast), OJ L 328, 21.12.2018, p. 82); Directive (EU) 2018/2002 of the European

Parliament and of the Council of 11 December 2018 amending Directive 2012/27/EU on

energy efficiency, (OJ L 328, 21.12.2018, p. 210); Regulation (EU) 2019/942 of the

European Parliament and of the Council of 5 June 2019 establishing a European Union

Agency for the Cooperation of Energy Regulators (recast), OJ L 158, 14.6.2019, p. 22);

Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019

on the internal market for electricity (recast), OJ L 158, 14.6.2019, p. 54); Directive

(EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on

common rules for the internal market for electricity (recast), OJ L 158, 14.6.2019, p. 125).

Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11

December 2018 on the Governance of the Energy Union and Climate Action, OJ L 328,

21.12.2018, p. 1; Directive (EU) 2018/2001 of the European Parliament and of the

Council of 11 December 2018 on the promotion of the use of energy from renewable

sources (recast), OJ L 328, 21.12.2018, p. 82; Directive (EU) 2018/2002 of the European

Parliament and of the Council of 11 December 2018 amending Directive 2012/27/EU on

energy efficiency, OJ L 328, 21.12.2018, p. 210; Regulation (EU) 2019/942 of the

European Parliament and of the Council of 5 June 2019 establishing a European Union

Agency for the Cooperation of Energy Regulators (recast), OJ L 158, 14.6.2019, p. 22;

Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019

on the internal market for electricity (recast), OJ L 158, 14.6.2019, p. 54; Directive (EU)

2019/944 of the European Parliament and of the Council of 5 June 2019 on common

rules for the internal market for electricity (recast), OJ L 158, 14.6.2019, p. 125.

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(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 capacity, with weather-dependent variability in

generation amounts and changing electricity flow patterns across Europe, as well as new

demand such as electric vehicles and heat pumps. Investments in grids, within and across

borders, are crucial to the proper functioning of the internal market, including security of

supply. This is necessary to integrate renewable energy and demand in a context where

these locate further apart than in the past; and ultimately to delivery 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 ensure that

each Member State reaches a level of electricity interconnectivity in line with the

electricity interconnection target for 2030 of at least 15 % laid down in Article 4, point

(d)(1), of Regulation (EU) 2018/1999, that this 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 as established by the framework concerning the Trans-European Networks for

Energy. Adequate connectivity should be provided to all Union citizens and undertakings

as it can bring 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 as referred to in Article 349 of the Treaty on the Functioning of the

Union (TFEU), which recognises their specific constraints and provides for the adoption

of specific measures in their regard.

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(8) The current electricity market design has also helped the emergence of new and innovative

products, services and measures on retail electricity markets, supporting energy efficiency

and renewable energy uptake and enhancing choice so as to help consumers reduce their

energy bills also 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, should be a key element of our

future electricity markets and systems. At the same time, there is a need to respect consumer

choices and allow consumers to benefit from a variety of contract offers, and shield

household consumers from high prices in times of crisis. Energy system integration

should be intended as 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

companies to significant price spikes with 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 for direct consumption through electrification and energy

system integration. Thanks to their low operational costs, renewable sources can positively

impact electricity prices across the Union and reduce ▌ consumption of fossil fuels.

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(11) The changes to the electricity market design should ensure that the benefits from rising

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 households falling into an energy poverty trap. Those changes should

mitigate the impact of high fossil fuel prices, notably that of gas, on electricity prices,

aiming to allow households and companies to reap the benefits of affordable and secure

energy from sustainable renewable and low carbon sources in the longer term, as well as the

role 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 should aim to achieve affordable and

competitive electricity prices for all consumers. As such, it should benefit not only

household consumers but also the competitiveness of the Union’s industries by facilitating

their possibilities to make the clean tech investments 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. These 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 in the market and facilitate energy system

integration in a cost-effective manner.

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(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 have a maximum of 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 defined closer to real time in order to maximize the opportunities for market

participants to trade shortages and surplus of electricity and contribute to better

integrating variable renewables in the electricity system. In case this change creates

security of supply risks and to allow for a cost-efficient transition into the shorter cross

zonal gate closure time, the transmission system operators should have the possibility to

request a derogation, based on an impact assessment and subject to regulatory approval,

in order to ask for an extension of the implementation timeline. This request should

include an action plan with concrete steps towards the implementation of the new intraday

gate closure time.

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(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

timeframes, NEMOs should submit all orders to the single day-ahead and intraday

coupling and should not organise the trading of day-ahead and 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, this obligation

should apply to NEMOs, to undertakings which directly or indirectly exercise control over

a NEMO and to undertakings that are directly or indirectly controlled by a NEMO. To

improve the transparency on the markets, the market participants should provide

information by generation unit where applicable, without prejudice of the presentation of

bids in accordance to the relevant framework in each Member State.

(16) In addition, the short-term electricity markets should ensure that small-scale flexibility

service providers can participate by lowering the minimum bid size.

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(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

electricity price crisis, it should be possible for the Member State to request system

operators to design 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 concerned regulatory authority in terms of

achieving a reduction of electricity demand and 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 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.

Alternatively, it should be possible for the peak shaving product to be activated

automatically based on a predefined electricity price. In order to verify volumes of

activated demand reduction, the system operator should use a baseline reflecting the

expected electricity consumption without the activation of the peak shaving product, and

based on a methodology developed in consultation with market participants and approved

by the regulatory authority. ACER should perform an assessment of the impact of using a

peak shaving products on the European electricity market, having due consideration of

undue distortion or 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

European electricity market under normal circumstances. In light of this assessment, the

Commission should where appropriate, submit a legislative proposal to amend Regulation

(EU) 2019/943 in order to introduce peak shaving products outside electricity price crisis

situations.

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(18) In order to be able to actively participate in the electricity markets and to provide their

flexibility, consumers are progressively equipped with smart metering systems. 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 and distribution system operators, and relevant market

participants including independent aggregators should be able to use, upon customer

consent, the data from dedicated measurement devices, in accordance with article 23 and

24 of Directive (EU) 2019/944 and relevant Union legislation, including data protection

and privacy law, in particular Regulation (EU) 2016/679. In addition, only in those

instances where smart metering systems are not yet installed and in instances where smart

metering systems do not provide for the sufficient level of data granularity, transmission and

distribution system operators, upon customer consent, 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

consumers in the market and the development of their demand response. The use of data

from these dedicated measurement devices should be accompanied by 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 of the European Parliament and of the Council

Member States should ensure that all personal data protection principles and obligations laid

down in Regulation (EU) 2016/679 are met, including on data minimisation. Where the

objective of this Regulation can be achieved without processing of personal data, data

controllers should rely on anonymised and aggregated data.

Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April

2016 on the protection of natural persons with regard to the processing of personal data

and on the free movement of such data, and repealing Directive 95/46/EC (General Data

Protection Regulation) (OJ L 119, 4.5.2016, p. 1).

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(20) Consumers and suppliers need effective and efficient forward markets to cover their long-

term price exposure and decrease the dependence on short-term prices. To ensure that

energy customers all over 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 measures to improve the functioning of the Union’s electricity

forward market 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.

(21) The part of the assessment related to the possible establishment of regional virtual hubs

should, among other, cover the implications regarding pre-existing intergovernmental

agreements related to cross-border joint ownership of power plants. If introduced, virtual

hubs would reflect the aggregated price of multiple bidding zones and provide a reference

price, which should be used by market operators to offer forward hedging products. To

that extent, virtual hubs should not be understood as entities arranging or executing

transactions. The regional virtual hubs, by providing a reference price index, would

enable the pooling of liquidity and provide additional hedging opportunities to market

participants.

In order to ensure uniform conditions for the implementation of this Regulation,

implementing powers should be conferred on the Commission to set out, where necessary,

detailed rules on the design of the Union’s electricity forward market as regards the

establishment of regional virtual hubs. The implementing powers should be exercised in

accordance with Regulation (EU) No 182/2011 of the European Parliament and of the

Council.

▌

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(22) To enhance the possibilities of market participants for hedging, the role of the single

allocation platform established in accordance with Commission Regulation (EU) 2016/1719

should be expanded. The single allocation platform should act as an entity offering

allocation and facilitating trading of financial long-term transmission rights on behalf of

the transmission system operators between the different bidding zones and, where

relevant, the regional virtual hubs.

(23) Network tariffs should incentivise transmission and distribution system operators to use

flexibility services through further developing innovative solutions to optimise the existing

grid and to procure flexibility services, in particular demand response or storage. For this

purpose, network tariffs should be designed so as to take into account the operational and

capital expenditures of system operators or an efficient combination of both so that they can

operate the electricity system cost-efficiently. The requirement for cost-reflectiveness

should not restrict the opportunity to redistribute costs efficiently in cases where

locational- or time-variant network charges are applied. This would further contribute to

integrating renewables at the least cost for the electricity system and enable final customers

to value their flexibility solutions. Regulatory authorities will play a central role in

ensuring that sufficient investment is provided for the necessary grid development,

expansion and reinforcement. Regulatory authorities should promote public acceptance

and the use of anticipatory investments, encouraging the acceleration of grid development

to meet the accelerated deployment of renewable generation, including where appropriate

in designated renewables acceleration areas, and smart electrified demand.

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(24) Offshore renewable energy sources, such as offshore wind, ocean energy and floating

photovoltaic, will play an instrumental role in building a power system largely based on

renewables and in ensuring climate neutrality by 2050. There are, however, substantial

obstacles to their wider and efficient deployment preventing the massive scale up needed to

achieve those objectives. Similar obstacles could arise for other offshore technologies in the

future. In order to reduce investment risk for offshore project developers, instruments

such as power purchase agreements or two-way contracts for differences can facilitate the

development. For offshore hybrid projects connected to more than one market in an

offshore bidding zone, there is an additional risk associated with the unique topographical

situation related to market access. To reduce the risks for such projects, transmission

system operators should compensate where, in the validated results of capacity

calculation, they have either not made available the capacity agreed in the connection

agreement on the interconnector or have not made available the capacity on the critical

network elements pursuant to the capacity calculation rules in Article 16(8) ,or both.

Transmission system operators should pay no compensation if, in the validated capacity

calculation results, they have made available the capacity of the interconnector at or

above the connection agreement requirements and they have made available the capacity

on critical network elements according to the rules of Article 16(8). In the respective

connection agreement with the offshore renewable plant operator, transmission system

operators should strive to give the total agreed capacity as firm, not flexible, and in line

with the framework for connection agreements in revised Directive (EU) 944/2019.

Member States should be informed sufficiently in advance about the connection

agreement. Compensation should be payable either if the available transmission capacities

are reduced to the extent that the full amount of electricity generation that the offshore

renewable plant would have otherwise been able to export cannot be delivered to the

surrounding markets or where despite being able to export there is a corresponding price

decrease in the offshore bidding zone due to capacity reductions, as compared to without

capacity reductions, or both. The compensation should be paid from congestion income. It

should apply where, and should be provided by, one or more transmission system

operators who have not made sufficient capacity available to export the electricity

generation capability on their respective interconnector up to the capacity agreed in the

connection agreement. In the interest of regional fairness, if this insufficient capacity is

due to other transmission system operators having not made available the capacity on

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their critical network elements, pursuant to the capacity calculation rules in Article 16 (8)

of Regulation (EU) 2019/943, the costs of compensation should be shared proportionately

between these transmission system operators in line with the polluter-pays principle. In

addition, any compensation not covered by this proportionate sharing may be divided

between the relevant parties in the Member States involved in the offshore hybrid project

as part of their cost sharing arrangements. This compensation should not result in

overcompensation and is intended to balance the reduced revenues of offshore renewable

electricity generation plant operators due to reduced access to interconnected markets. It

should only be related to the production capability available to the market, which may be

weather dependent and excludes the outage and maintenance operations of the offshore

project. The compensation in case of lack of access to the transmission network should not

be interpreted as constituting priority dispatch and should be aligned with the principles

of non-discrimination and maximisation of cross-border capacities for trade in Article 16

of Regulation (EU) 2019/943. Moreover, there should not be double-compensation for the

same risk covered under this provision, for example if the risk is already covered under a

contract for difference, or other relevant support scheme. Details of this compensation

mechanism and the methodology for the implementation to be developed including the

conditions under which the measure may expire, such as the existence of enough demand

within the offshore bidding zone (e.g. a large electrolyser) or direct access to a sufficient

number of markets for the risk to disappear, are intended to be further elaborated in an

implementing act including where relevant through amendments to Commission

Regulation (EU) 2015/1222.

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(25) In the day-ahead wholesale market, the power plants with lower marginal costs are

dispatched first, but the price received by all market participants is set by the last plant

needed to cover the demand, which is the plant with the highest marginal costs, when the

markets clear. In this context, the energy crisis has shown that a surge in the price of gas and

hard coal can translate into exceptional and lasting increases of the prices at which the gas

and coal-fired generation facilities bid in the day-ahead wholesale market. That in turn has

led to exceptionally high prices in the day-ahead market across the Union, as gas and coal-

fired generation facilities are often the plants with the highest marginal costs needed to meet

the demand for electricity.

(26) Given the role of the price in the day-ahead market as a reference for the price in other

wholesale electricity markets, and the fact that all market participants receive the clearing

price, the technologies with significantly lower marginal costs have consistently recorded

high revenues.

(27) To reach the Union’s decarbonisation targets and the objectives set out in REPowerEU to

become more energy independent, the Union needs to accelerate the deployment of

renewables at a much faster pace. In view of the investment needs required to achieve these

goals, the market should ensure that a long-term price signal is established.

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(28) In this framework, Member States should strive to create the right market conditions for

long-term market-based instruments, such as power purchase agreements (‘PPAs’). PPAs

are bilateral purchase agreements between producers and buyers of electricity, concluded on

a voluntary basis and based on market price conditions without regulatory interventions

in price-setting. They provide long-term price stability for the customer and the necessary

certainty for the producer to take the investment decision. Nevertheless, only a handful of

Member States have active PPA markets and buyers are typically limited to large

companies, not least because PPAs face a set of barriers, in particular the difficulty to cover

the risk of payment default from the buyer in these long-term agreements. Member States

should take into consideration the need to create a dynamic PPA market when setting the

policies to achieve the energy decarbonisation objectives set out in their integrated national

energy and climate plans. When designing measures directly affecting PPAs, Member

States should respect possible legitimate expectations and take into account the effects on

existing and future PPAs.

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(29) In accordance with Directive (EU) 2018/2001 of the European Parliament and of the

Council

, Member States are to assess the regulatory and administrative barriers to long-

term renewables PPAs, and to remove unjustified barriers and disproportionate and

discriminatory procedures and charges, and promote the uptake of, such agreements. In

addition, Member States are to describe policies and measures facilitating the uptake of

renewables PPAs in their integrated national energy and climate plans. Without prejudice to

that obligation to report on the regulatory context affecting the PPA market, Member States

should ensure that instruments to reduce the financial risks associated to the buyer defaulting

on its long-term payment obligations in the framework of PPAs are accessible to companies

that face entry barriers to the PPA market and are not in financial difficulty. Member States

should be able to decide to set up a guarantee scheme at market prices if private guarantees

are not accessible or insufficiently accessible. In that case, Member States should include

provisions to avoid lowering the liquidity in the electricity markets, such as by using

financial PPAs. Member States could decide to facilitate the aggregation of demand for

PPAs from customers that individually face barriers to entry to the PPA market, but

collectively should be able to provide an attractive offer for PPAs to producers. Member

States should not provide support to PPAs that purchase generation from fossil fuels.

Member States should be able to limit guarantee schemes they back to the exclusive

support of new renewable generation, in line with their decarbonisation policies, in

particular where the market for renewables PPAs is not sufficiently developed. While the

default approach should be non-discrimination between consumers, Member States could

decide to target these instruments to specific categories of consumers, applying objective

and non-discriminatory criteria. In this framework, Member States should ensure

appropriate coordination, including with facilities provided at Union level, for instance by

the European Investment Bank (‘EIB’).

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(30) Member States have at their disposal several instruments to support the development of PPA

markets when designing and allocating public support. Allowing renewable energy project

developers participating in a public support tender to reserve a share of the generation for

sale through a PPA would contribute to nurture and grow PPA markets. In addition, as part

of these tenders’ evaluation Member States should endeavour to apply criteria to incentivise

the access to the PPA market for actors that face entry barriers, such as small and medium-

sized enterprises (‘SMEs’), giving preference to bidders presenting a signed PPA or a

commitment to sign a PPA for part of the project’s generation from one or several potential

buyers that face difficulties to access the PPA market.

(31) To contribute to the transparency and development of PPA markets in the EU, ACER

should publish an annual assessment on those markets, assess the need to develop and

issue standard contracts for PPAs for voluntary use and develop them if the assessment

concludes there is such a need.

(32) Member States should pay particular attention to cross-border PPAs and remove

unjustified barriers specifically related to them, allowing consumers in Member States

with limited capacity to access power generated in other regions without discrimination.

(33) When, based on the related assessment, the Commission concludes that Member States

require support in the removal of barriers in PPA markets, it should issue a guidance. The

main focus of such guidance should be the removal of barriers preventing the expansion

of PPA markets, including cross-border PPAs. Such barriers could take many forms,

including regulatory barriers, and in particular disproportionate or discriminatory

procedures or charges, the role of guarantees of origin or the treatment of PPAs in the

access of offtakers or potential offtakers to financing solutions.

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(34) Regulation (EU) 2018/1999 provides for the use of the Union renewable energy financing

mechanism as a tool to facilitate the achievement of the Union's binding target of

renewable energy in 2030. According to Directive (EU) 2023/2413, Member States should

collectively endeavour to increase the share of energy from renewable sources in the

Union’s gross final consumption of energy in 2030 to 45 % in addition to the binding EU

level target of 42.5 %. Therefore, the Commission should assess whether measures at

Union level could contribute to the achievement of the additional 2.5 % share,

complementing national measures. In this context, the Commission should analyse the

possibility to use the Union renewable energy financing mechanism to organise EU-level

renewable energy auctions in line with the relevant regulatory framework.

(35) Where Member States decide to support publicly financed investments by “direct price

support schemes” ▌ in new low carbon, non-fossil fuel electricity generation-facilities to

achieve the Union’s decarbonisation objectives, those schemes should be structured by way

of two-way contracts for difference or equivalent schemes with the same effects such as to

include, in addition to a revenue guarantee, an upward limitation of the market revenues of

the generation assets concerned. Whereas the obligation pursuant to this Regulation should

only apply to support for investments in new power generating facilities, Member States

should be able to decide to grant support schemes in the form of two-way contracts for

difference or equivalent schemes with the same effects also for new investments aimed at

substantially repowering existing power generation facilities, or at substantially increasing

their capacity or prolonging their lifetime.

(36) To ensure legal certainty and predictability, the obligation to structure direct support

schemes by means of two-way contracts for difference or equivalent schemes with the

same effects should only apply to contracts under direct price support schemes for

investments in new power generating facilities concluded as of three years after the date

of entry into force of this Regulation. That transitional period should be five years for

offshore hybrid assets connected to two or more bidding zones due to the complexity of

such projects.

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(37) The participation of market participants in direct price support schemes in the form of

two-way contracts for difference or equivalent schemes with the same effects should be

voluntary.

(38) The obligation to use two-way contracts for difference or equivalent schemes with the

same effects is without prejudice to Article 6(1) of Directive (EU) 2018/2001.

(39) While Directive [XXX EMD] amends Article 4(3) second subparagraph of the Directive

(EU) 2018/2001, the remaining provisions of Article 4 of Directive (EU) 2018/2001, which

sets out design principles for the support schemes for energy from renewable sources,

remain fully applicable.

(40) ▌Two-way contracts for difference or equivalent schemes with the same effects would

ensure that revenues of producers stemming from new investments in electricity generation

which benefit from public support become more independent from the volatile prices of

fossil fuels-based generation which typically sets the price in the day-ahead market.

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(41) Design principles in accordance with this Regulation should apply to direct price support

schemes in the form of two-way contracts for difference or equivalent schemes with the

same effects. In the assessment of such two-way contracts for difference or equivalent

schemes with the same effects under State aid rules, the Commission should check the

compliance with provisions of Union law which are intrinsically linked to State aid rules,

such as the design principles for two-way contracts for difference or equivalent schemes

with the same effects contained in this Regulation. The design of these two-way contract

for differences or equivalent schemes with the same effects should preserve the incentives

for the generating facility to operate and participate efficiently in the electricity markets,

in particular to reflect market circumstances. In its assessment, the Commission should

ensure that the design of two-way contracts for difference or equivalent schemes with the

same effects does not lead to distortions to competition and trade in the internal market.

The Commission should notably ensure that the distribution of revenues to undertakings

does not distort the level playing field in the internal market in particular in cases where

no competitive bidding process can be applied. Two-way contracts for difference or

equivalent schemes with the same effects could vary in duration and could include inter

alia injection-based contracts for difference with one or several strike prices, a floor price,

or capability or yardstick contracts for differences. The obligation to use two-way

contracts for difference or equivalent schemes with the same effects does not apply to

support schemes not directly linked to electricity generation, such as storage, and which

do not use direct price support, such as investment aid in the form of upfront grants, tax

measures or green certificates amongst others. To incentivise that the counterparties fulfil

their contractual obligations, two-way contracts for difference or equivalent schemes with

the same effects should include penalty clauses in case of undue unilateral early

termination of the contract.

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(42) However, to the extent that the limitation to set out direct price support schemes in the form

of two-way contracts for difference or equivalent schemes with the same effects narrows

down the types of direct price support schemes that Member States are able to adopt as

regards renewable energy sources, it should be limited to low carbon, non-fossil fuel

technologies, with low and stable operational costs and to technologies which typically do

not provide flexibility to the electricity system, while excluding technologies that are at

early stages of their market deployment. This is necessary to ensure that the economic

viability of generation technologies with high marginal costs is not jeopardised and to

maintain the incentives of the technologies which can offer flexibility to the electricity

system to bid in the electricity market based on their opportunity costs. In addition, the

limitation to set out direct price support schemes in the form of two-way contracts for

difference or equivalent schemes with the same effects should not apply to emerging

technologies for which other types of direct price support schemes may be better placed to

incentivise their uptake. The limitation should be without prejudice to the possible

exemption for small-scale installations and demonstration projects pursuant to Directive

(EU) 2023/2413 and consider the specificities of renewable energy communities in

accordance with ▌ that Directive.

(43) In view of the need to provide regulatory certainty for the producers, the obligation for

Member States to apply direct price support schemes for the production of electricity in the

form of two-way contracts for difference or equivalent schemes with the same effects

should apply only to investments in new electricity generation-facilities from the sources

specified in the recital above.

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(44) Thanks to the upward limitation of the market revenues, direct price support schemes in the

form of two-way contracts for difference or equivalent schemes with the same effects

should provide an additional source of revenues for Member States in periods of high energy

prices. To further mitigate the impact of high electricity prices on the energy bills of

consumers, Member States should ensure that the revenues collected from producers subject

to direct price support schemes in the form of two-way contracts for difference or

equivalent schemes with the same effects, or the equivalent in financial value of those

revenues, are passed on to final customers, including household consumers, small and

medium enterprises and energy intensive undertakings. When distributing the revenues to

households, Member States should in particular be able to favour vulnerable customers or

those in energy poverty. In the light of the wider benefits for electricity customers

resulting from investments in renewable energy, energy efficiency, and low carbon energy

deployment, it should also be possible for Member States to use the revenues from two-

way contract for difference or equivalent schemes with the same effects, or the equivalent

in financial value of those revenues, to finance investments to reduce electricity costs for

final customers and, including as regards specific economic activities such as investments

in distribution grid development, renewable energy sources and electric vehicle charging

infrastructure. It should also be possible for Member States to use such revenues, or the

equivalent in financial value of those revenues, to finance the costs of the direct price

support schemes. The redistribution of revenues should be done in a way that ensures that

customers are still to some extent exposed to the price signal, so that they reduce their

consumption when the prices are high, or shift it to periods of lower prices (which are

typically periods with a higher share of RES production). In particular, Member States

should be able to consider the consumption in off-peak hours to preserve incentives to

flexibility. Member States should ensure that the level playing field and competition

between the different suppliers is not affected by the redistribution of revenues to the final

electricity consumers. These principles should not be compulsory for revenues generated

by contracts under direct price support schemes concluded before the date of application

of the obligation to use two-way contracts for difference or equivalent schemes with the

same effects. It is possible for Member States to distribute revenues from two-way

contracts for difference or equivalent schemes with the same effects without that

distribution constituting a retail price regulation pursuant to Article 5 of Directive (EU)

2019/944.

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(45) Furthermore, Member States should ensure that the direct price support schemes, or

equivalent schemes with the same effects, irrespective of their form, do not undermine the

efficient, competitive and liquid functioning of the electricity markets, preserving the

incentives of producers to react to market signals, including stop generating when electricity

prices are below their operational costs, and of final customers to reduce consumption when

electricity prices are high. Member States should ensure that support schemes do not

constitute a barrier for the development of commercial contracts such as PPAs.

(46) Thus, two-way contracts for difference or equivalent schemes with the same effects and

power purchase agreements play complementary roles in advancing the energy transition

and bringing the benefits of renewables and low carbon energy to consumers. Subject to the

requirements set out in this Regulation, Member States should be free to decide which

instruments they use to achieve their decarbonisation objectives. Through PPAs, private

investors contribute to additional renewable and low carbon energy deployment while

locking low and stable electricity prices over the long-term. Likewise, through two-way

contracts for difference or equivalent schemes with the same effects, the same objective is

achieved by public entities on behalf of consumers. Both instruments are necessary to

achieve the Union’s decarbonisation targets through renewable and low carbon energy

deployment, while bringing forward the benefits of low-cost electricity generation for

consumers.

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(47) The accelerated deployment of renewables necessitates a growing availability of flexibility

solutions to ensure their integration to the grid and to enable the electricity system and grid

to adjust to the variability of electricity generation and consumption across different time

horizons. In order to foster non-fossil flexibility, regulatory authorities, or other authorities

or entities designated by a Member State, should periodically assess the need for flexibility

at national level in the electricity system based on the input of transmission and distribution

system operators and on a common European methodology subject to public consultation

and approved by ACER. The assessment of the flexibility needs of the electricity system

should take into account all existing and planned investments (including existing assets that

are not yet connected to the grid) on sources of flexibility such as flexible electricity

generation, interconnectors, demand ▌ response, energy storage or the production of

renewable fuels, in view of the need to decarbonise the energy system. ACER should

periodically assess the national reports and draw up a report at Union level providing

recommendations on issues of cross-border relevance. On the basis of the national

flexibility assessment, Member States should define an indicative national objective for

non-fossil flexibility, including the respective specific contributions of both demand side

response and energy storage to that objective, which should also be reflected in their

integrated national energy and climate plans in accordance with Regulation (EU)

2018/1999 of the European Parliament and of the Council

. In light of those plans, the

Commission should be able to draw up a Union strategy on demand response and energy

storage that is consistent with the Union's 2030 targets for energy and climate. It should

be possible for the Commission to accompany the Union strategy, where appropriate, by a

legislative proposal.

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(48) To achieve the indicative national objective for non-fossil flexibility, including the

respective specific contributions of demand response and energy storage, and where

flexibility needs are not being addressed by the removal of market barriers and existing

investments, Member States should be able to apply non-fossil flexibility support schemes

consisting of payments for the available capacity of non-fossil flexibility. Furthermore,

Member States that already apply a capacity mechanism should consider to promote the

participation of non-fossil flexibility such as demand response and energy storage by

redesigning criteria or features without prejudice to the application of Article 22 of

Regulation (EU) 2019/943. Member States that already apply a capacity mechanism should

also be able to apply non-fossil flexibility support schemes if these are necessary to

achieve the indicative national objective for non-fossil flexibility, in particular while

adapting their capacity mechanisms to further promote the participation of non-fossil

flexibility such as demand ▌ response and storage. These schemes should cover new

investments in non-fossil flexibility, including investments on existing assets, including

those aimed at further developing demand response flexibility.

(49) To support environmental protection objectives the CO

emissions’ limit, set out in Article

22(4) of Regulation (EU) 2019/943 of the European Parliament and of the Council, should

be seen as an upper limit. Therefore, Member States could set technical performance

standards and CO

emissions’ limits that restrict participation in capacity mechanisms to

flexible, fossil-free technologies in full alignment with the Guidelines on State aid for

climate, environmental protection and energy

which encourage Member States to

introduce green criteria in capacity mechanisms.

▌

Communication from the Commission – Guidelines on State aid for climate, environmental

protection and energy 2022 (OJ C 80, 18.2.2022, p. 1).

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(50) As uncoordinated capacity mechanisms can have a significant impact on the internal

electricity market, the Clean Energy Package introduced a comprehensive framework to

better assess the need and improve the design of capacity mechanisms. Notwithstanding

the necessity to limit distortions to competition and the internal market, together with an

appropriate regulatory framework, capacity mechanisms can play an important role in

ensuring resource adequacy, in particular during the transition towards a carbon-free

system and for insufficiently interconnected energy systems. Therefore, while capacity

mechanisms should no longer be considered as measures of last resort, their necessity and

design should be periodically assessed in light of the evolving regulatory framework and

market circumstances. However, the procedure for the adoption of capacity mechanisms

has proved to be complex. To address potential possibilities of streamlining and

simplifying the process of applying for a capacity mechanism, and to ensure that

adequacy concerns can be addressed by Member States in a timely manner while

providing the necessary controls to prevent harm for the internal market, the Commission

should within 6 months [of the entry into force of this regulation] submit a comprehensive

report assessing such possibilities. In that context, the Commission should request that the

Agency amends the methodology for the European resource adequacy assessment in line

with the applicable process, as appropriate. After consultation with the Member States, the

Commission should come forward with proposals with a view to streamlining and

simplifying the process for assessing capacity mechanisms as appropriate within 9 months

after entry into force of this Regulation.

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(51) The connection of new generation and demand installations, in particular renewable energy

plants, often faces delays in grid connection procedures. One of the reasons for such delays

is the lack of available grid capacity at the location chosen by the investor, which implies the

need for grid extensions or reinforcements to connect the installations to the system in a safe

manner. A new requirement for electricity system operators, both at transmission and

distribution levels, to publish and update information on the capacity available for new

connections in their areas of operation would contribute to decision-making by investors on

the basis of information of grid capacity availability within the system and thus to the

required acceleration in the deployment of renewable energy. This information should be

updated on a regular basis, at least monthly by transmission system operators and at least

quarterly by distribution system operators. While Member States might decide not to apply

this requirement to electricity undertakings which serve less than 100 000 connected

customers or serving small isolated systems, they should encourage these undertakings to

provide system users with this information on an annual basis and promote cooperation

between distribution system operators for this purpose. System operators should also

publish the criteria used to determine the available grid capacities, such as existing

demand and generation capacities, the assumptions made for assessing the possible

further integration of additional system users, including the relevant information on

possible energy curtailment, and the expectation of upcoming relevant network

developments.

(52) Furthermore, to tackle the problem of lengthy reply times on requests for connection to the

grid, transmission system operators should provide clear and transparent information to

system users about the status and treatment of their connection requests. Transmission

system operators should ▌ provide such information within a period of three months from

the submission of the request and update it on a regular basis and at least quarterly.

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(53) Since Estonia, Latvia and Lithuania are not yet synchronised with the European

electricity system, they face very specific challenges when organising balancing markets

and the market-based procurement of ancillary services. While synchronisation is well

underway, one of the critical prerequisites for stable synchronous system operation is the

availability of sufficient balancing capacity reserves for frequency regulation. However,

being dependent on the Russian synchronous area for frequency management, the Baltic

countries were not yet in the position to develop an own functioning balancing market.

The Russian war of aggression against Ukraine has substantially increased the risk for

security of supply resulting from the absence of own balancing markets.

Therefore, the requirements of Article 6(9), (10), (11) of Regulation (EU) 2019/943 and of

Commission Art 41(2) of Regulation (EU) 2017/2195, which are designed to apply to

existing balancing markets, do not yet reflect the situation in Estonia, Latvia and

Lithuania, in particular as the development of balancing market requires time and new

investments in balancing capacity. Estonia, Latvia and Lithuania should therefore,

irrespective of those requirements, be entitled to conclude longer-term contracts to

procure balancing capacity for a transitional period.

(54) The transitional periods for Estonia, Latvia and Lithuania should phase out as soon as

possible after the synchronisation, and be used to develop the appropriate markets

instruments offering short-term balancing reserves and other indispensable ancillary

services, and should be limited to the time necessary for this process.

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(55) The Baltic States are foreseen to be synchronized with the continental Europe

synchronous area by one double circuit line connecting Poland and Lithuania. Upon

synchronization, the capacity of this line will have to be, in large part, kept for reliability

margins in a case of unexpected outage in the Baltic System and resulting unintended

deviations. Transmission system operators should continue offering maximum capacity

for cross-border trading, compliant with operational security limits and considering

possible contingencies in the Polish and Lithuanian systems, including those resulting

from outages of HVDC lines or disconnection of the Baltic States from the continental

Europe synchronous area. The specific situation of this interconnection should be taken

into consideration for the calculation of the total capacity and contingencies pursuant to

Article 16(8) of Regulation (EU) 2019/943.

(56) Capacity mechanisms should be open to the participation of all resources that are capable

of providing the required technical performance, which may include gas-fired power

plants, provided they satisfy the emission limit in Article 22(4) as well as any national

emissions threshold or other objective environmental criteria which Member States may

wish to apply to hasten the transition away from fossil fuels.

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(57) To support environmental protection objectives, Article 22(4) of Regulation (EU)

2019/943 of the European Parliament and of the Council sets out requirements regarding

emission limits for capacity mechanisms. However, during their transition to a

carbon-free system and in the aftermath to the energy crisis, Member States applying

capacity mechanisms which were approved before the entry into force of Regulation (EU)

2019/943, can exceptionally derogate, and as a last resort mechanism, from this CO

emission limit for a limited period of time. Such derogation should however be limited to

existing generation capacity that started commercial production before 4 July 2019, i.e.

before the entry into force of the Clean Energy Package. The request for derogation

should be accompanied by a report from the Member State concerned, which should

assess the impact of the derogation in terms of greenhouse gas emissions and on the

energy transition. Such report should also contain a plan with milestones to transition

away from the participation of generation capacity that does not meet the CO

emission

limits in capacity mechanisms. Upon the granting of the derogation, Member States

should be allowed to organise procurement processes which meet all the requirements in

Chapter IV of Regulation (EU) 2019/943 of the European Parliament and of the Council,

except for those regarding CO

emission limits. Generation capacity that does not meet

the CO

emission limits should not be procured for a period longer than one year and for

a delivery period which do not exceed the duration of the derogation. The additional

procurement process open to participation of generation capacity that does not meet the

emission limits should be preceded by a procurement process aimed at maximizing

the participation of capacity that meets the CO

emission limits, including by letting

capacity prices rising high enough to incentivise investments in such capacity.

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(58) The Commission should review this regulation in order to ensure the resilience of the

electricity market design in times of crisis and its ability to support the Union’s

decarbonisation objectives, further enhance market integration and promote the

necessary infrastructure investments as well as the development of a PPA market. On the

basis of such review, the Commission should submit a comprehensive report to the

European Parliament and to the Council and may adopt a legislative proposal, where

appropriate. In the report, the Commission should assess, in particular, the effectiveness

of the structure and functioning of short-term electricity markets, as well as their potential

inefficiencies and possible remedies and tools to be applied in crisis or Emergency

situations and the suitability of Union legal and financial framework on distribution

grids. The report should also cover the ability to deliver on the Union’s renewable and

internal energy market objectives; and the potential and viability of the establishment of

one or several Union market platforms for PPAs.

(59) The measures envisaged by this Regulation are also without prejudice to the application of

Directive 2014/65/EU of the European Parliament and of the Council

, Regulation (EU)

2016/1011 of the European Parliament and of the Council

and Regulation (EU) 648/2012

of the European Parliament and of the Council

(60) To the extent that any of the measures envisaged by this Regulation constitute State aid,

the provisions concerning such measures are without prejudice to the application of

Articles 107 and 108 TFEU. The Commission is competent to assess the compatibility of

State aid with the internal market.

(61) Since the objectives of this Regulation, namely to improve the design of the integrated

electricity market, in particular to prevent unduly high electricity prices, cannot be

sufficiently achieved by the Member States, but can rather be better achieved at Union

level, the Union may adopt measures, in accordance with the principle of subsidiarity as

set out in Article 5 of the Treaty on European Union. In accordance with the principle of

proportionality, as set out in that Article, this Regulation does not go beyond what is

necessary to achieve those objectives.

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Article 1

Amendments to Regulation (EU) 2019/943 ▌

Regulation (EU) 2019/943 is amended as follows:

(1) Article 1 is amended as follows:

(-a) point (a) is replaced by the following:

‘(a) set the basis for an efficient achievement of the objectives of the Energy

Union and the objective to achieve climate neutrality by 2050 at the

latest, in particular the climate and energy framework for 2030 by

enabling market signals to be delivered for increased efficiency, higher

share of renewable energy sources, security of supply, flexibility,

system integration through multiple energy carriers, sustainability,

decarbonisation and innovation;’

(a) point (b) is replaced by the following:

‘(b) set fundamental principles for well-functioning, integrated electricity

markets, which allow all resource providers and electricity customers

non-discriminatory market access, enable the development of forward

electricity markets to allow suppliers and consumers to hedge or protect

themselves against the risk of future volatility in electricity prices,

empower and protect consumers, ensure competitiveness on the global

market, enhance security of supply and flexibility through demand

response, energy storage and other non-fossil flexibility solutions, ensure

energy efficiency, facilitate aggregation of distributed demand and

supply, and enable market and sectoral integration and market-based

remuneration of electricity generated from renewable sources;’

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(b) the following point is added:

‘(e) support long-term investments in renewable energy generation, flexibility

and grids to enable consumers ▌ to make their energy bills affordable

and less dependent from fluctuations of short-term electricity market

prices, in particular fossil fuel prices in the medium to long-term;

(ea) set a framework for the adoption of measures to address electricity

price crisis;’

(2) In Article 2, the following points are added:

‘(72) ‘peak hour’ means an hour where, based on the forecasts of transmission

system operators and, where applicable, nominated electricity market

operators, the gross electricity consumption or the gross consumption of

electricity generated from sources other than renewable sources as referred to

in Article 2(1) of Directive (EU) 2018/2001 of the European Parliament and

of the Council or the day-ahead wholesale electricity price are expected to be

the highest, taking cross-zonal exchanges into account;

(73) ‘peak shaving’ means the ability of market participants to reduce electricity

consumption from the grid at peak hours at the request of the system operator;

(74) ‘peak shaving product’ means a market-based product through which market

participants can provide peak shaving to ▌ system operators;

(75) ‘regional virtual hub’ means a non-physical region covering more than one

bidding zone for which a reference price is set in application of a

methodology;

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(76) ‘two-way contract for difference’ means a contract signed between a power

generating facility operator and a counterpart, usually a public entity, that

provides both minimum remuneration protection and a limit to excess

remuneration; ▌

(77) ‘power purchase agreement’ or ‘PPA’ means a contract under which a natural

or legal person agrees to purchase electricity from an electricity producer on a

market basis;

▌

(79) ‘dedicated measurement device’ means a device linked to or embedded in an

asset that provides demand response or flexibility services on the electricity

market or to transmission and distribution system operators;

(80) ‘flexibility’ means the ability of an electricity system to adjust to the variability

of generation and consumption patterns and grid availability, across relevant

market timeframes.’’

(2a) In Article 2, point (22) is replaced by the following

(22) ‘capacity mechanism’ means a measure to ensure the achievement of the

necessary level of resource adequacy by remunerating resources for their

availability, excluding measures relating to ancillary services or congestion

management;

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(3) Article 7 is amended as follows:

(a) paragraph 1 is replaced by the following:

‘1. Transmission system operators and NEMOs, ▌ shall jointly organise the

management of the integrated day-ahead and intraday markets in

accordance with Regulation (EU) 2015/1222. Transmission system

operators and NEMOs shall cooperate at Union level or, where more

appropriate, at a regional level in order to maximise the efficiency and

effectiveness of Union electricity day-ahead and intraday trading. The

obligation to cooperate shall be without prejudice to the application of

Union competition law. In their functions relating to electricity trading,

transmission system operators and NEMOs shall be subject to regulatory

oversight by the regulatory authorities pursuant to Article 59 of Directive

(EU) 2019/944 and ACER pursuant to Articles 4 and 8 of Regulation

(EU) 2019/942 and the transparency obligations and effective

supervision against market manipulation as laid down in the relevant

provisions in Regulation [REMIT II].’

(b) paragraph 2 is amended as follows:

(i) point (c) is replaced by the following:

‘(c) maximise the opportunities for all market participants to participate

in cross-zonal and intra-zonal trade in a non-discriminatory way

and as close as possible to real time across and within all bidding

zones; ’

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(ii) the following point (ca) is inserted:

‘(ca) be organised in such a way as to ensure the sharing of liquidity

between all NEMOs, at all times, both for cross-zonal and for

intra-zonal trade. For the day-ahead market, from one hour

before the gate closure time until the latest point in time where

day-ahead trade is allowed, NEMOs shall both submit all orders

for day-ahead products or products with same characteristics to

the single day-ahead coupling and shall not organise trading with

day-ahead products or products with same characteristics outside

the single day-ahead coupling. For the intraday market, from the

single intraday coupling gate opening time until the latest point

in time when intraday trading is allowed in a given bidding zone,

NEMOs shall both submit all orders for intraday products and

products with same characteristics to the single intraday coupling

and NEMOs shall not organise trading with intraday products or

products with same characteristics outside the intraday coupling.

This obligation shall apply to NEMOs and to undertakings which

directly or indirectly exercise control over a NEMO and to

undertakings which are directly or indirectly controlled by a

NEMO.

(f) be transparent and, where applicable, provide information by

generation units while at the same time protecting the

confidentiality of commercially sensitive information and

ensuring trading occurs in an anonymous manner;’

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(4) the following Articles ▌ are inserted:

‘ Article 7a

Peak shaving product

1. Where a regional or Union-wide electricity price crisis is declared in

accordance with Article 66a of Directive (EU) 2019/944, and without

prejudice to Article 40(5) and (6) of thereof Member States may request

system operators to propose the procurement of peak shaving products in

order to achieve a reduction of electricity demand during peak hours. Such

procurement shall be limited to the duration set out in the decision adopted

pursuant to Article 66a (1) of Directive (EU) 2019/944.

2. When requested pursuant to paragraph 1, system operators shall, after

consulting stakeholders, submit a proposal ▌setting out the dimensioning and

conditions for the procurement and activation of the peak shaving product to

the regulatory authority of the Member State concerned for its approval.

2a. The concerned national regulatory authority shall assess the proposal in

terms of achieving a reduction of electricity demand and impact on wholesale

electricity price during peak hours. The assessment shall take into

consideration the need for the peak shaving product not to unduly distort the

functioning of the electricity markets, and not to cause a redirection of

demand response services towards peak shaving products. Based on this

assessment, the regulatory authority may request the system operator to

amend the proposal.

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2b. The proposal for peak shaving product shall comply with the following

requirements:

(a) the dimensioning of the peak shaving product shall be based on an

analysis of the need for an additional service to ensure security of supply

without endangering grid stability, of its impact on the market and of

its expected costs and benefits. The dimensioning shall take into account

the forecast of demand, the forecast of electricity generated from

renewable energy sources, the forecast of other sources of flexibility in

the system, such as energy storage, and the wholesale price impact of

the avoided dispatch. The dimensioning of the peak shaving product

shall be limited to ensure that forecasted costs do not exceed the

expected benefits of the product;

(b) the procurement of a peak shaving product shall be based on objective,

transparent, market-based , non-discriminatory criteria and be limited to

demand response; It shall not exclude participating assets from

accessing other markets;

competitive bidding, which can be continuous, with selection based on

the lowest cost of meeting pre-defined technical and environmental

criteria and shall allow the effective participation of consumers, directly

or through aggregation;

(ca) the minimum bid size shall not be higher than 100 kW, including

through aggregation;

(d) contracts for a peak shaving product shall not be concluded more than a

week before its activation ▌ ;

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(e) the activation of the peak shaving product shall not reduce cross-zonal

capacity;

(f) the activation of the peak shaving product shall take place before or

within the day-ahead market and may be done based on a predefined

electricity price;

(g) the activation of peak shaving product shall not imply starting fossil fuel-

based generation located behind the metering point, avoiding the

increasing of greenhouse gas emissions.

3. The actual reduction of consumption resulting from the activation of a peak

shaving product shall be measured against a baseline, reflecting the expected

electricity consumption without the activation of the peak shaving product.

Where a system operator procures a peak shaving product, it shall develop a

baseline methodology in consultation with market participants and, where

relevant, taking into account the Implementing Act adopted pursuant to

Article 59.1.e, and submit it to the regulatory authority for its approval.

4. Regulatory authorities shall approve the proposal of the ▌ system operators

seeking to procure a peak shaving product and the baseline methodology

submitted in accordance with paragraphs 2 and 3 or shall request the ▌ system

operators to amend the proposal where it does not meet the requirements set

out in these paragraphs.

4a. By six months after the end of a crisis, the Agency shall assess the impact of

using peak shaving products on the European electricity market, after

consulting stakeholders. The assessment shall take into consideration the

need for these products not to unduly distort the functioning of the electricity

markets, and not to cause a redirection of demand response services towards

peak shaving products. The Agency may issue recommendations that

national regulatory authorities shall take into account in their assessment

pursuant to paragraph 2a.

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4b. By 30 June 2025, the Agency shall assess the impact of developing peak

shaving products on the European electricity market under normal market

circumstances, after consulting stakeholders. The assessment shall take into

consideration the need for these products not to unduly distort the

functioning of the electricity markets, and not to cause a redirection of

demand response services towards peak shaving products. Based on this

assessment, the Commission may submit a legislative proposal to amend this

Regulation in order to introduce peak shaving products outside electricity

price crisis situations.

Article 7b

Dedicated measurement device

1. Without prejudice to Article 19 of Directive (EU) 2019/944, transmission and

distribution system operators, and relevant market participants including

independent aggregators, may use, upon the consent of the final customer,

data from dedicated measurement devices for the observability and settlement

of demand response and flexibility services, including from storage systems.

This use of data from dedicated metering devices for the purposes of this

article should be in accordance with article 23 and 24 of Directive (EU)

2019/944 and relevant Union legislation, including data protection and

privacy law, in particular Regulation (EU) 2016/679. In case the data are

used for research purposes, information shall be aggregated and

anonymised.

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1a. Where a final customer does not have a smart meter installed or where the

smart meter of a final customer does not deliver the necessary data to provide

demand response or flexibility services, including through an independent

aggregator, transmission system operators and distribution system operators

shall accept the data from a dedicated measurement device, where available,

for the settlement of demand response and flexibility services, including

storage systems, and shall not discriminate against that final customer in

their procurement of flexibility services. This obligation shall apply upon the

establishment and subject to compliance with the rules and requirements

established by the Member States pursuant to paragraph 3.

2. Member States shall establish requirements for a dedicated measurement

device data validation process to check and ensure the quality and consistency

of the respective data, and interoperability, in accordance with Articles 23

and 24 of Directive (EU) 2019/944 and relevant Union legislation. ▌

(5) Article 8 is amended as follows:

(a) paragraph 1 is replaced by the following:

‘1. ‘NEMOs shall allow market participants to trade energy as close to real

time as possible and at least up to the intraday cross-zonal gate closure

time. From 1 January 2026, the intraday cross-zonal gate closure time

shall not be more than 30 minutes ahead of real time.

The regulatory authorities of a Member State may, at the request of the

relevant transmission system operator, grant a derogation from the

requirement in the first subparagraph until 1 January 2029. The

request shall be submitted to the regulatory authority concerned and

shall include:

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(a) an impact assessment, taking into account feedback from relevant

NEMOs and market participants, in accordance with Article 9 of

Regulation (EU) 2015/1222, demonstrating the negative impacts of such

a measure on the security of supply in the national electricity system,

cost-efficiency including in relation to existing balancing platforms in

accordance with Regulation (EU) 2017/2195, integration of renewable

energy and greenhouse gas emissions; and

(b) an action plan aiming to shorten the intraday cross-zonal gate

closure time to 30 minutes by no later than 1 January 2029.

The regulatory authority may, at the request of the relevant

transmission system operator, grant a further derogation from the

requirement referred to in the first subparagraph by a maximum of 2,5

years counting from the expiry of the period referred to in the second

subparagraph. The request from the relevant transmission system

operator shall be submitted to the regulatory authority of the requesting

transmission system operator, the ENTSO for Electricity and ACER no

later than 30 June 2028 and shall include:

(a) a new impact assessment justifying the need for a further

derogation, based on risks to the security of supply in the national

electricity system, cost-efficiency, the integration of renewable energy

and greenhouse gas emissions, taking into account feedback from

market participants and NEMOs; and

(b) a revised action plan to shorten the intraday cross-zonal gate

closure time to 30 minutes by the date for which extension is requested

and no later than the date requested for the derogation.

ACER shall issue an opinion on the cross-border impact of a further

derogation within six months of receipt of a request for such

derogation. The regulatory authority concerned shall take that opinion

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into account before deciding upon a request for further derogation.

By 1 December 2027, the Commission, after consulting NEMOs,

ENTSO for Electricity, ACER and relevant stakeholders, shall submit a

report to the European Parliament and to the Council assessing the

impact of the implementation of the decreasing of the cross-zonal gate

closure time established in this Article, the costs and benefits, the

feasibility and practical solutions towards further decreasing it in order

to allow market participants to trade energy as close to real time as

possible. The report shall consider the impacts on the electricity system

security, the cost-efficiency, the benefits to the integration of renewable

energy and to the reduction of greenhouse gas emissions.; ’

(b) paragraph 3 is replaced by the following:

‘3. NEMOs shall provide products for trading in day-ahead and intraday

markets which are sufficiently small in size, with minimum bid sizes of

100 kW or less, to allow for the effective participation of demand

response, energy storage and small-scale renewables including direct

participation by customers, as well as through aggregation.’;’

(6) Article 9 is replaced by the following:

‘ Article 9

Forward markets

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1. In accordance with Regulation (EU) 2016/1719, transmission system

operators shall issue long-term transmission rights or have equivalent

measures in place to allow market participants, including owners of power-

generating facilities using renewable energy, to hedge price risks, unless an

assessment of the forward market on the bidding zone borders performed by

the relevant competent regulatory authorities shows that there are sufficient

hedging opportunities in the concerned bidding zones.

2. Long-term transmission rights shall be allocated, on a regular basis, in a

transparent, market based and non-discriminatory manner through a single

allocation platform. The frequency of allocation and the maturities of the

long-term cross-zonal capacity shall support the efficient functioning of the

forward market.

3. The design of the Union’s forward market shall comprise the necessary tools

to improve the ability of market participants to hedge price risks in the

internal electricity market. ▌

4. Within 18 months from the entry into force of this amending Regulation, the

Commission shall, after having consulted relevant stakeholders, assess the

impact of possible measures to achieve the objective under paragraph 3

above. This impact assessment shall inter alia cover:

(a) possible changes to the frequency of allocation for long-term

transmission rights;

(b) possible changes to the maturities of these long-term transmission rights,

in particular maturities extended up to at least three years;

(d) ways to strengthen the secondary market; and

(e) the possible introduction of regional virtual hubs for the forward market.

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5. As regards regional virtual hubs for the forward market, the assessment

under paragraph 4 above shall cover the following elements:

(a) ▌ the adequate geographical scope of the regional virtual hubs,

including the bidding zones that would constitute these hubs and

specific situations of bidding zones belonging to two or more virtual

hubs, aiming to maximise the price correlation between the reference

prices and the prices of the bidding zones constituting regional virtual

hubs;

(aa) the level of electricity interconnectivity of Member States, in particular

of those Member States below the interconnection targets for 2020 and

2030 laid down in Article 4, point (d)(1), of Regulation (EU)

2018/1999;

(b) the methodology for the calculation of the reference prices for the

regional virtual hubs for the forward market, aiming to maximise the

correlations between the reference price and the prices of the bidding

zones constituting a regional virtual hub; ▌

virtual hub;

(d) ▌ the way to maximise trading opportunities for hedging products

referencing the regional virtual hubs for the forward market as well as

for long term transmission rights from bidding zones to regional virtual

hubs;

(da) the ways to ensure that the single allocation platform referred to in

paragraph 2 shall offer allocation and facilitate trading of long-term

transmission rights.

(db) the implications regarding pre-existing intergovernmental agreements

and rights.

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6. Based on the outcome of this assessment, the Commission shall, within 24

months from the entry into force of this amending Regulation, adopt an

implementing act in accordance with Article 59(1) to further detail the

specific measures and tools to achieve the objectives in paragraph 3 and their

precise features.

7. The single allocation platform established in accordance with Regulation (EU)

2016/1719 shall act as an entity offering allocation and facilitating trading of

long-term transmission rights on behalf of transmission system operators. It

shall have a legal form as referred to in Annex II to Directive (EU) 2017/1132

of the European Parliament and of the Council.

▌ ▌

▌

8. Where a regulatory authority considers that there are insufficient hedging

opportunities available for market participants, and after consultation of

relevant financial market competent authorities in case the forward markets

concern financial instruments as defined under point (15) of Article 4(1) of

Directive 2014/65/EU of the European Parliament and of the Council

, it

may require power exchanges or transmission system operators to implement

additional measures, such as market-making activities, to improve the liquidity

of the forward market. ▌

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9. Subject to compliance with Union competition law and with Directive (EU)

2014/65 and Regulations (EU) 648/2012 of the European Parliament and of

the Council and 600/2014 of the European Parliament and of the Council,

market operators may develop forward hedging products, including long-

term forward hedging products, to provide market participants, including

owners of power-generating facilities using renewable energy sources, with

appropriate possibilities for hedging financial risks against price

fluctuations. Member States shall not require that such hedging activity may

be limited to trades within a Member State or bidding zone.’

(7) Article 18 is amended as follows:

(a) paragraph 2 is replaced by the following:

“2. Tariff methodologies shall reflect the fixed costs of transmission system

operators and distribution system operators and shall consider both

capital and operational expenditure to provide appropriate incentives to

transmission system operators and distribution system operators over

both the short and long run, including anticipatory investments, in order

to increase efficiencies ▌ including energy efficiency; foster market

integration, the integration of renewable energy and security of supply;

support the use of flexibility services, enable the use of flexible

connections; promote efficient and timely investments, including

solutions to optimise the existing grid; facilitate energy storage, demand

response and related research activities; contribute to the achievements

of the objectives set out in the national energy and climate plans, to

reduce environmental impact and promote acceptance; and facilitate

innovation in the interest of consumers in areas such as digitalisation,

flexibility services and interconnection, in particular to develop the

required infrastructure to reach the minimum electricity

interconnection target for 2030 laid down in Article 4, point (d)(1), of

Regulation (EU) 2018/1999;’

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(aa) paragraph 3 is replaced by the following:

‘ Where appropriate, the level of the tariffs applied to producers or final

customers, or both shall provide locational investment signals at Union

level, such as incentives via tariff structure to reduce re-dispatching

and power grid reinforcement costs and take into account the amount

of network losses and congestion caused, and investment costs for

infrastructure.’;’

(b) paragraph 8 is replaced by the following:

“8. Transmission and distribution tariff methodologies shall provide

incentives to transmission and distribution system operators for the most

cost-efficient operation and development of their networks including

through the procurement of services. For that purpose, regulatory

authorities shall recognise relevant costs as eligible, including costs

related to anticipatory investments, shall include those costs in

transmission and distribution tariffs, and shall, where appropriate,

introduce performance targets in order to provide incentives to

transmission and distribution system operators to increase overall system

efficiency in their networks, including through energy efficiency, the use

of flexibility services and the development of smart grids and intelligent

metering systems.

‘(f) methods to ensure transparency in the setting and structure of tariffs,

including anticipatory investments determined after consultation to

relevant stakeholders, consistent with relevant Union and national

energy objectives and taking into account the acceleration areas as

established in accordance with the Directive (EU) 2018/2001 on the

promotion of renewable energy sources;’

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(d) in paragraph 9, the following point ▌ is added:

‘(i) incentives for efficient investments in networks, including resources

providing flexibility and flexible connection agreements.’

(8) in Article 19, paragraph 2 is amended as follows:

(a) point (b) is replaced by the following:

‘(b) maintaining or increasing cross-zonal capacities through optimisation of

the usage of existing interconnectors by means of coordinated remedial

actions, where applicable, or covering costs resulting from network

investments that are relevant to reduce interconnector congestion; or’;’

(b) the following point ▌ is added:

‘(c) compensating offshore renewable electricity generation plant operators

in an offshore bidding zone directly connected to two or more bidding

zones if access to interconnected markets has been reduced in such a way

that it results in the offshore renewable electricity plant operator not

being able to export its electricity generation capability to the market

and, where relevant, a corresponding price decrease in the offshore

bidding zone, as compared to without capacity reductions. The

compensation applies where, in the validated capacity calculation

results, one or more transmission system operators either have not made

available the capacity agreed in connection agreement on the

interconnector or have not made available the capacity on the critical

network elements pursuant to the capacity calculation rules in Article

16(8), or both. The transmission system operators which are

responsible for the reduction of access to interconnected markets shall

be responsible for the compensation to offshore renewable electricity

generation plant operators. On an annual basis, this compensation

shall not exceed the total congestion income generated on

interconnectors between the concerned bidding zones.’

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(9) The following chapter ▌ is inserted:

‘ Chapter IIIa

Specific investment incentives to achieve the Union’s decarbonisation

objectives

Article 19a

Power purchase agreements

1. Without prejudice to Directive (EU) 2018/2001, on the promotion of

renewable sources, Member States shall promote the uptake of power

purchase agreements (‘PPAs’), including by removing unjustified barriers

and disproportionate or discriminatory procedures or charges, with a view to

providing price predictability and reaching the objectives set out in their

integrated national energy and climate plan with respect to the ▌

decarbonisation dimension referred to in point (a) of Article 4 of Regulation

(EU) 2018/1999, including with respect to renewable energy, while preserving

competitive and liquid electricity markets and cross-border trade.

1a. When carrying out the revision of this Regulation according to article 69, the

Commission, in consultation with relevant stakeholders, shall assess the

potential and viability of one or several EU market platforms for PPAs, to be

used on a voluntary basis, including the interplay of these potential platforms

with other existing electricity market platforms and the pooling of demand

for PPAs through aggregation.

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2. Member States in a coordinated manner shall ensure that instruments, such as

guarantee schemes at market prices, to reduce the financial risks associated to

off-taker payment default in the framework of PPAs are in place and accessible

to customers that face entry barriers to the PPA market and are not in financial

difficulty. Such instruments may include, but are not limited to, state-backed

guarantee schemes at market prices, private guarantees, or facilities pooling

demand for PPAs, in compliance with relevant Union law. For this purpose,

Member States shall ensure appropriate coordination, including with relevant

Union-level facilities. Member States may determine what categories of

customers are targeted by these instruments, applying non-discriminatory

criteria among and within the categories of customers.

3. Without prejudice to Articles 107 and 108 TFEU, if a guarantee scheme for

PPAs is backed by the Member State, it shall include provisions to avoid

lowering the liquidity in electricity markets and shall not provide support to the

purchase of generation from fossil fuels. Member States may decide to limit

those guarantee schemes to the exclusive support of the purchase of new

renewable generation according to the Member State’s decarbonisation

policies, including in particular where the market for renewables PPAs is not

sufficiently developed.

4. ▌Support schemes for electricity from renewable sources, shall allow the

participation of projects which reserve part of the electricity for sale through a

renewable PPA or other market-based arrangements provided this does not

negatively affect competition in the market, in particular in cases where the

two parties involved in this PPA are controlled by the same entity.

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4a. In the design of such support schemes Member States shall endeavour to

make use of evaluation criteria to incentivise bidders to facilitate the access

of customers that face entry barriers to the PPA market, provided this does

not negatively affect competition in the market.

5. PPAs shall specify the bidding zone of delivery and the responsibility for

securing cross-zonal transmission rights in case of a change of bidding zone in

accordance with Article 14 ▌

6. PPAs shall specify the conditions under which customers and producers may

exit from PPAs, such as any applicable exit fees and notice periods, in

compliance with Union competition law.

6a. Member States, when designing measures directly affecting PPAs shall

respect possible legitimate expectations and shall take into account the effect

of those measures on existing and future PPAs.

6b. By 31 January 2026 and every two years thereafter, the Commission shall

assess whether barriers persist and whether there is sufficient transparency

in the PPAs markets.

The Commission may draw up specific guidance on removal of barriers in

the PPA markets, including disproportionate or discriminatory procedures or

charges.

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Article 19ab

Voluntary standardised PPAs and information on PPAs

1. ACER shall publish an annual assessment on the PPA market at Union and

Member State level as part of the monitoring report referred to in Article 15

of Regulation (EU) 2019/942.

2. By 3 months after the entry into force of this Regulation, ACER shall

assess, in close coordination with the relevant institutions and stakeholders,

the need to develop and issue standard contracts for Power Purchase

Agreements for voluntary use, adapted to the needs of the different

categories of counterparties.

In case the assessment concludes that there is a the need to develop and issue

such an standard contracts, ACER together with the NEMOs and, after

consulting the relevant stakeholders, shall develop these standard contracts

considering the following elements:

- The use of those standard contracts shall be voluntary for the contracting

parties.

- Standard contracts shall have, inter alia, the following characteristics:

a) offer a variety of contract durations;

b) provide different price formulas;

c) consider the offtaker’s load profile and the generator’s generation profile.

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Article 19ac

Union level measures to contribute to the achievement of the additional share of

energy from renewable sources

1. The Commission shall assess whether measures at Union level can

contribute to the achievement of the Member States collective endeavour of

an additional 2.5 % share of energy from renewable sources in the Union’s

gross final consumption of energy in 2030 in line with Directive (EU)

2023/2413, complementing national measures. The Commission shall

analyse the possibility to use the Union renewable energy financing

mechanism to organise Union level renewable energy auctions in line with

the relevant regulatory framework.

Article 19b

Direct price support schemes in the form of two-way contracts for difference

for investments ▌

1. Direct price support schemes for investments in new power-generating

facilities for the generation of electricity from the sources listed in paragraph 2

shall take the form of two-way contracts for differences or of equivalent

schemes with the same effects.

The first subparagraph shall apply to contracts under direct price support

schemes for investments in new generation concluded as of three years after

[the date of entry into force of this Regulation]. For offshore hybrid asset

projects connected to two or more bidding zones, the transitional period shall be

five years after [the date of entry into force of this Regulation].

The participation of market participants in direct price support schemes in

the form of two-way contracts for difference and in equivalent schemes with

the same effects shall be voluntary.

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1a. All direct price support schemes in the form of two-way contracts for

difference and equivalent schemes with the same effects shall be designed to:

(a) preserve incentives for the generating facility to operate and participate

efficiently in the electricity markets, in particular to reflect market

circumstances;

(b) prevent any distortive effect of the support scheme on the operation,

dispatch and maintenance decisions of the generating facility or on

bidding behaviour in day-ahead, intraday, ancillary services and

balancing markets;

the upward limit to excess remuneration are aligned with the cost of the

new investment, the market revenues, to guarantee the long-term

economic viability of the power generating facility while avoiding

overcompensation;

(d) avoid undue distortions to competition and trade in the internal market,

notably by determining remuneration amounts through a competitive

bidding process that it is open, clear, transparent and non-

discriminatory. In cases where no competitive bidding process can be

conducted, contracts for difference or equivalent schemes with the

same effects – and the applicable strike prices - shall be designed to

ensure that the distribution of revenues to undertakings does not create

undue distortions to competition and trade in the internal market. ;

(e) avoid distortions to competition and trade in the internal market.

resulting from the distribution of revenues to undertakings;

(f) include penalty clauses applicable in the case of undue unilateral early

termination of the contract.

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1b. In the assessment of two-way contracts for difference or equivalent schemes

with the same effects under Articles 107 and 108 TFEU, the Commission

shall ensure compliance with the design principles pursuant to paragraph 1a.

2. Paragraph 1 shall apply to ▌ investments in new generation of electricity from

the following sources:

(a) wind energy;

(b) solar energy;

(d) hydropower without reservoir;

(e) nuclear energy;

3. The revenues, or the equivalent in financial value of those revenues, arising

from direct price support schemes in the form of two-way contracts for

difference and from equivalent schemes with the same effects referred to in

paragraph 1 shall be distributed to final customers.

Notwithstanding the requirement in the first subparagraph, the revenues, or

the equivalent in financial value of those revenues, may also be used to

finance the costs of the direct price support schemes or investments to reduce

electricity costs for final customers.

The distribution of revenues to final customers shall be designed to maintain

incentives to reduce their consumption or shift it to periods when electricity

prices are low and not to undermine competition between electricity

suppliers.

▌

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4. In line with the third subparagraph of Article 4(3) of Directive (EU)

2018/2001, Member States may exempt small-scale renewables

installations and demonstration projects from the obligation under

paragraph 1.

Article 19c

Assessment of flexibility needs

1. No later than one year after the approval by ACER of the methodology

pursuant to paragraph 6 of this Article, and every two years thereafter, the

regulatory authority, or another authority or entity designated by a Member

State, shall adopt a report on the estimated needs for flexibility ▌ for a period

of at least the next 5 to 10 years at national level, in view of the need to cost

effectively achieve security and reliability of supply and decarbonise the

electricity system, taking into account the integration of variable renewable

electricity sources and the different sectors, as well as the interconnected

nature of the electricity market, including interconnection targets and

potential availability cross-border flexibility.

The report shall :

(a) be consistent with the European Resource Adequacy Assessment and

national adequacy assessments pursuant to Articles 23 and 24 of this

Regulation.

(b) be based on the data and analyses provided by the transmission and

distribution system operators of that Member State pursuant to paragraph 3 and

using the common methodology pursuant to paragraph 4 and, when duly

justified, additional data and analysis.

Where the Member State has designated a transmission system operator or

another entity for this purpose, the regulatory authority shall approve or

amend the report.

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2. The report shall at least:

(a) evaluate the different types of needs for flexibility, at least on a seasonal,

daily and hourly basis, to integrate electricity generated from renewable

sources in the electricity system. This evaluation shall assess, inter alia,

different assumptions in respect to electricity market prices, generation and

demand;

(b) consider the potential of non-fossil flexibility resources such as demand

▌ response and energy storage, including aggregation and interconnection, to

fulfil this need, both at transmission and distribution levels.

mitigation measures and incentives, including the removal of regulatory

barriers and possible improvements to markets and system operation services

or products

(ca) evaluate the contribution of digitalization of electricity transmission and

distribution networks; and

(d) take into account flexibility needs that is expected to be available in other

Member States.

3. The electricity transmission and distribution system operators of each Member

State shall provide the data and analyses referred to in paragraph 4 that are

needed for the preparation of the report referred to in paragraph 1 to the

regulatory authority or, where relevant, the authority or entity designated in

paragraph 1. If duly justified, the regulatory authority or, where relevant, the

authority or entity designated in paragraph 1 may ask the relevant

transmission system operators and distribution system operators to provide

additional input to the report, beyond the requirements referred to in

paragraph 4. Relevant transmission or distribution system operators will

coordinate with hydrogen and gas sectors system operators in order to gather

the relevant information in case needed in application of this article.

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4. The ENTSO for Electricity and the EU DSO entity shall coordinate

transmission and distribution system operators as regards the data and analyses

to be provided in accordance with paragraph 3. In particular, they shall:

(a) define the type ▌ and format of data that transmission and distribution

system operators shall provide to the regulatory authorities or, where

relevant, the authority or entity designated in paragraph 1;

(b) develop a methodology for the analysis by transmission and distribution

system operators of the flexibility needs, taking into account at least all

available sources in a cost-efficient manner in the different timeframes,

including in other Member States; planned investments in

interconnection, and flexibility at transmission and distribution level as

well as the need to decarbonise the electricity system in order to meet the

Union’s 2030 targets for energy and climate and its 2050 climate

neutrality objective, in compliance with the Paris Agreement. The

methodology shall contain guiding criteria on how to assess the

capability of the different flexibility sources to cover the needs.

5. The ENTSO for Electricity and the EU DSO entity shall closely cooperate with

each other regarding the coordination of transmission and distribution system

operators as regards the provision of data and analyses pursuant to

paragraph 4.

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6. By nine months after the entry into force of this Regulation, the ENTSO for

Electricity and the EU DSO entity shall jointly submit to ACER a proposal

regarding the type of data and format to be submitted to regulatory authorities,

or, where relevant, the authority or entity designated in paragraph 1, and the

methodology for the analysis of the flexibility needs referred to in paragraph

4. Within three months of receipt of the proposal, ACER shall either approve

the proposal or amend it. In the latter case, ACER shall consult the Electricity

Coordination Group, the ENTSO for Electricity and the EU DSO entity before

adopting the amendments. The adopted proposal shall be published on ACER's

website.

7. The regulatory authorities or, where relevant, the authority or entity

designated in paragraph 1, shall submit the reports referred to in paragraph 1

to the European Commission and ACER and publish them. Within 12 months

of receipt of the reports, ACER shall issue a report analysing them and

providing recommendations on issues of cross-border relevance regarding the

findings of the regulatory authorities or ,where relevant, the authority or entity

designated in paragraph 1, including recommendations on removing barriers

to the entry of non-fossil flexibility resources.

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Among the issues of cross-border relevance, the Agency shall assess:

a) how to better integrate the flexibility needs analysis referred to in paragraph 1

with the methodology for the European resource adequacy assessments in

accordance with Article 23 and the methodology for the Union-Wide Ten

Year Network Development Plan, ensuring consistency between them. The

results would be taken into account in further revisions of these

methodologies according to the relevant EU legislation.

b) the estimated need for flexibility in the electricity system at Union level and its

projected economically available potential for a period of the next 5 to 10

years taking into account the national reports;

c) the potential introduction of further measure to unleash flexibility potential in

the electricity markets and system operation;

The European Scientific Advisory Board on Climate Change may, on its own

initiative, provide input to ACER on how to ensure compliance with the

Union’s 2030 targets for energy and climate and its 2050 climate neutrality

objective.

7b. ENTSO-E shall update the Union-wide network development plan to include

the results of the flexibility needs assessments. The national assessment of

flexibility needs referred to in paragraph 1 shall be considered by

transmission and distribution system operators in their network development

plans.

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Article 19d

Indicative national objective for non-fossil flexibility

No later than 6 months after the submission of the report pursuant to Article

19c(1) of this Regulation, each Member State shall define, based on this

report, an indicative national objective for non-fossil flexibility, including the

respective specific contributions of both demand response and energy storage

to that objective. Member states may achieve this objective by realising the

identified potential of non-fossil flexibility, via the removal of identified

market barriers or support schemes as envisaged in Article 19e. This

indicative national objective, including the respective specific contributions of

demand response and energy storage to that objective, as well as measures to

achieve this objective shall also be reflected in Member States’ integrated

national energy and climate plans as regards the dimension ‘Internal Energy

Market’ in accordance with Articles 3, 4 and 7 of Regulation (EU) 2018/1999

and in their integrated biennial progress reports in accordance with Article 17

of Regulation (EU) 2018/1999. Member States may define provisional

indicative objectives pursuant to Article 19c(1) of this Regulation.

Following the assessment carried out in line with Article 9 of Regulation

(EU) 2018/1999, the Commission, after receiving the national indicative

objective defined and communicated by the Member States according to

paragraph 1, shall submit a report to the European Parliament and to the

Council assessing the national reports.

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On the basis of the conclusions of the report elaborated with the first information communicated

by Member States, the Commission may draw up a Union strategy on flexibility, with a particular

focus on demand response and energy storage, to facilitate their deployment that is consistent

with the Union's 2030 targets for energy and climate as defined in Article 2, point (11), of

Regulation (EU) 2018/1999 and the climate-neutrality objective laid down in Article 2 of

Regulation (EU) 2021/1119 which may be accompanied, where appropriate, by a legislative

proposal.

Article 19e

Non-fossil flexibility support schemes

1. Where investments in non-fossil flexibility are insufficient to achieve the

indicative national objective or, where relevant, provisional indicative

objectives, identified in accordance with Article 19d, Member States may

apply non-fossil flexibility support schemes consisting of payments for the

available capacity of non-fossil flexibility without prejudice to Articles 12 and

13. Member States which apply a capacity mechanism shall consider to make

the necessary adaptations in the design of the capacity mechanisms to

promote the participation of non-fossil flexibility such as demand side

response and storage, without prejudice to the possibility for those Member

States to use the non-fossil flexibility support schemes mentioned in this

paragraph.

2. The possibility for Member States to apply measures pursuant to paragraph 1

shall not preclude them from addressing their indicative targets identified in

Article 19d by other means.

▌

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Article 19f

Design principles for non-fossil flexibility support schemes

▌Non-fossil flexibility support schemes applied by Member States in

accordance with Article 19e(1) shall:

(a) not go beyond what is necessary to achieve the indicative national

objective, or where relevant the provisional indicative objective,

identified in accordance with Article 19d in a cost-effective manner;

(b) be limited to new investments in non-fossil flexibility resources such as

demand side response and energy storage;

(ba) endeavour to take into consideration locational criteria to ensure that

investments in new capacity take place in optimal locations;

metering point;

(d) select capacity providers by means of an open, transparent, competitive,

voluntary, non-discriminatory and cost-effective process;

(e) prevent undue distortions to the efficient functioning of the electricity

markets including preserving efficient operation incentives and price

signals and the exposure to price variation and market risk;

(f) provide incentives for the integration in the electricity market in a

market-based and market-responsive way, while avoiding unnecessary

distortions of electricity markets as well as taking into account possible

system integration costs and grid congestion and stability;

(g) set out a minimum level of participation in the market in terms of

activated energy, which takes into account the technical specificities of

the asset delivering the flexibility

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(h) apply appropriate penalties to capacity providers which do not respect the

minimum level of participation in the market referred to in point (g), or

which do not follow efficient operation incentives and price signals

referred to in point (e);

(i) promote the opening to the cross-border participation of those

resources that are capable of providing the required technical

performance, where a cost-benefit analysis is positive. ▌

(9a) Article 21 is amended as follows:

[a] paragraph 1 is replaced by the following:

‘ Member States may, while implementing the measures referred to in Article

20(3) of this Regulation in accordance with Article 107, 108 and 109 of the

TFEU, introduce capacity mechanisms.

[b] paragraph 7 is deleted.

[c] paragraph 8 is replaced by the following:

8. Capacity mechanisms shall be approved by the Commission for no longer

than 10 years. The amount of the committed capacities shall be reduced on

the basis of the implementation plans referred to in Article 20. Member

States shall continue to apply the implementation plan after the introduction

of the capacity mechanism.’

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(9b) In Article 22(1) point (a) is deleted.

(10) in Article 37 (1), point (a) is replaced by the following:

“(a) carrying out the coordinated capacity calculation in accordance with the

methodologies developed pursuant to the forward capacity allocation guideline,

the capacity allocation and congestion management guideline and the

electricity balancing guideline adopted on the basis of Article 18(5) of

Regulation (EC) No 714/2009;;”

(11) Article 50 is amended as follows:

(a) the following paragraph 4a is added:

“4a.

– Transmission system operators shall publish in a clear and

transparent manner, information on the capacity available for new

connections in their respective areas of operation with high spatial

granularity, while respecting public security and data

confidentiality, including the capacity under connection request

and the possibility of flexible connection in congested areas. The

publication shall include information on the criteria used to

calculate available capacity for new connections. Transmission

system operators shall update that information on a regular basis,

at least monthly.

– Transmission system operators shall ▌ provide clear and

transparent information to system users about the status and

treatment of their connection requests including, where relevant,

those related to flexible connection agreements. They shall

provide such information within ▌ three months from the

submission of the request. Where the requested connection is

neither granted nor permanently rejected, transmission system

operators shall update that information on a regular basis and at

least quarterly. ’

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(12) in Article 57, the following paragraph 3 is added:

‘3. Distribution system operators and transmission system operators shall

cooperate with each other in publishing information on the capacity available

for new connections in their respective areas of operation in a consistent

manner and giving sufficient granular visibility to developers of new energy

projects and other potential network users.’

(13) in Article 59 (1), point (b) is replaced by the following:

“(b) ▌ capacity-allocation and congestion- management rules pursuant to Article 6

of Directive (EU) 2019/944 and Articles 7 to 10, 13 to 17, 19 and 35 to 37 of

this Regulation, including rules on day-ahead, intraday and forward capacity

calculation methodologies and processes, grid models, bidding zone

configuration, redispatching and countertrading, trading algorithms, single day-

ahead and intraday coupling, different governance options, the firmness of

allocated cross-zonal capacity, congestion income distribution, the details

and specific features of the tools referred to in Article 9(3) by reference to the

elements specified in paragraphs (4) and (5) thereof, the allocation and

facilitation of trading of financial long-term transmission rights by the single

allocation platform as well as the frequency, maturity and specific nature of

such long-term transmission rights, cross-zonal transmission risk hedging,

nomination procedures, and capacity allocation and congestion management

cost recovery, and methodology for compensating offshore renewable

electricity plant operators for capacity reductions; ” ’

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(13a) in Article 59(2), point (a) is replaced by the following:

‘(a) network connection rules including rules on the connection of transmission-

connected demand facilities, transmission-connected distribution facilities

and distribution systems, connection of demand units used to provide

demand response, requirements for grid connection of generators and other

system users, requirements for high-voltage direct current grid connection,

requirements for direct current-connected power park modules and remote-

end high-voltage direct current converter stations, and operational

notification procedures for grid connection;’ "’

(13b) Article 69 is amended as follows:

(a) paragraph 2 is replaced by the following:

‘ By 30 June 2026, the Commission shall review this Regulation and

shall submit a comprehensive report to the European Parliament and

to the Council on the basis of that review, accompanied by a legislative

proposal where appropriate.

The Commission's report shall assess, among others:

(a) The effectiveness of the current structure and functioning of the

short-term electricity markets, including in crisis or emergency

situations, and, more generally, the potential inefficiencies

concerning the internal electricity market and the different

options for the introduction of possible remedies and tools to be

applied in crisis or emergency situations in view of the experience

at international level and of the evolution and new developments

in the Union electricity market;

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(b) the suitability of the current Union legal and financing

framework on distribution grids to deliver on the Union’s

renewable and internal energy market objectives.

establishment of one or several EU market platforms for PPAs, to

be used on a voluntary basis, including the interplay of these

potential platforms with other electricity market platforms and

the pooling of demand for PPAs through aggregation.

4. By ... [six month after the date of entry into force of this amending

Regulation], the Commission shall submit to the European Parliament

and to the Council a detailed report assessing possibilities of

streamlining and simplifying the process of applying a capacity

mechanism under Chapter IV of this Regulation, so as to ensure that

adequacy concerns can be addressed by Member States in a timely

manner. In that context, the Commission shall request that ACER

amends the methodology for the European resource adequacy

assessment referred to in Article 23 in accordance with the process set

out in Articles 23 and 27, as appropriate.

By ... [nine months after the date of entry into force of this amending

Regulation] the Commission shall, after consultation with Member

States, come forward with proposals with a view to simplifying the

process of assessing capacity mechanisms as appropriate.’

(13a) In Article 64, the following paragraph is added:

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(2a) By way of derogation from Article 6(9), (10) and (11), Estonia, Latvia and

Lithuania, may conclude financial contracts for balancing capacity up to five

years before the start of the provision of the balancing capacity. The duration of

such contracts shall not extend beyond eight years after Estonia, Latvia and

Lithuania have joined the continental European synchronous area.

The national regulators of Estonia, Latvia and Lithuania may allow their domestic

transmission system operators to allocate cross-zonal capacity on a market-based

process as described in Article 41 of Commission Regulation (EU) 2017/2195,

without volume limitations until six months after the moment when the co-

optimised allocation process is fully implemented and operational pursuant to

paragraph 3 of Article 38 of Commission Regulation (EU) 2017/2195.

(13d) In Article 64, the following paragraph is inserted.

By way of derogation from Article 22(4)(b), Member States may request that

generation capacity that started commercial production before 4 July 2019 and that

emits more than 550 g of CO2 of fossil fuel origin per kWh of electricity and more

than 350 kg CO2 of fossil fuel origin on average per year per installed kWe may,

subject to compliance with Articles 107 and 108 TFEU, exceptionally be committed or

receive payments or commitments for future payments after 1 July 2025 under a

capacity mechanism approved by the Commission before the entry into force of

Regulation 2019/943.

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2d. The Commission shall assess the impact of the request in terms of greenhouse gas emissions.

The Commission may grant the derogation after having assessed the report under subparagraph

2e and provided that the following conditions are fulfilled:

(a) the Member State has carried out, after the date of entry into force of

Regulation (UE) 2019/943, a competitive bidding process in line with the

provisions of Article 22 and for a delivery period after 1 July 2025, which

aims at maximising the participation of capacity providers which meet the

requirements in Article 22(4);

(b) the amount of capacity offered in the competitive bidding process referred to

in letter point (a) is not sufficient to address the adequacy concern as

identified pursuant to Article 20 (1) for the delivery period covered by that

bidding process;

origin per kWh of electricity is committed or receives payments or

commitments for future payments for a period not exceeding one year, and

for a delivery period which does not exceed the duration of the derogation,

and is procured through an additional procurement process which complies

with all requirements in Article 22 except for those set out in point (b) of

paragraph 4 and only for the amount of capacity that is needed to solve the

adequacy concern identified in letter b).

The derogation pursuant to this paragraph may be applied until 31

December 2028, provided that the conditions in points (a) to (c) are complied

with for the entire duration of the derogation.

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2e. The application for the derogation shall be accompanied by a report from the Member State

which shall include:

(a) An assessment of the impact of the derogation in terms of greenhouse gas emissions, and on

the transition towards renewable energy, increased flexibility, energy storage, electromobility and

demand response.

(b) a plan with milestones to transition away from the participation of generation capacity

referred to in the first subparagraph in capacity mechanisms by the date of the expiry of the

derogation, including a plan to procure the necessary replacement capacity in line with the

indicative national trajectory for the overall share of renewable energy and an assessment of the

investment barriers causing the lack of sufficient bids in the competitive bidding procedure

referred to in point (a).

(14) The following Article ▌ is added:

“ Article 69a

Interaction with Union financial legislation

Nothing in this Regulation shall derogate from the provisions of Directive (EU)

2014/65, Regulation (EU) 648/2012 and Regulation (EU) 600/2014 when

market participants or market operators engage in activities related to financial

instruments in particular as defined under point (15) of Article 4(1) of

Directive (EU) 2014/65.“

(15) in Annex I point 1.2 is replaced by the following:

“1.2. Coordinated capacity calculation shall be performed for all allocation

timeframes.”

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Article 2

Amendments to Regulation (EU) 2019/942 ▌

Regulation (EU) 2019/942 is amended as follows:

(1) Article 2 is amended as follows:

▌

▌ ▌

(b) point (d) is replaced by the following:

“(d) issue individual decisions on the provision of information in accordance

with Article 3(2), Article 7(2), point (b), and Article 8, point (c); on

approving the methodologies, terms and conditions in accordance with

Article 4(4), Article 5(2), (3) and (4); on bidding zones reviews as

referred to in Article 5(7); on technical issues as referred to in Article

6(1); on arbitration between regulators in accordance with Article 6(10);

related to regional coordination centres as referred to in Article 7(2),

point (a); on approving and amending methodologies and calculations

and technical specifications as referred to in Article 9(1); on approving

and amending methodologies as referred to in Article 9(3); on

exemptions as referred to in Article 10; on infrastructure as referred to in

Article 11, point (d); on matters related to wholesale market integrity

and transparency pursuant to Article 12 ▌ ; and on approving and

amending proposals from the ENTSO for electricity and the EU DSO

entity related to the methodology concerning the data and analysis to be

provided as regards the flexibility needs pursuant to Article 5(10). ”; ”’

(aa) issue opinions and recommendations addressed to the single allocation

platform established in accordance with Regulation (EU) 2016/1719.

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(2) in Article 3(2), the following subparagraph is added:

“ This paragraph shall also apply to the single allocation platform established in

accordance with Regulation (EU) 2016/1719 ”;’

(3) in Article 4, the following paragraph ▌ is added:

“9. paragraphs 6, 7 and 8 shall also apply to the single allocation platform

established in accordance with Regulation (EU) 2016/1719.”;’

(4) in Article 5(8), the following ▌ subparagraph is added:”

‘ ACER shall monitor the single allocation platform established in accordance

with Regulation (EU) 2016/1719.”’

▌

(6) in Article 5, the following paragraph ▌ is added:

“9. ACER shall approve and where necessary amend the joint proposal from the

ENTSO for electricity and the EU DSO entity related to the methodology

concerning the data and analysis to be provided as regards the flexibility needs

pursuant to Article 19c(4) of Regulation (EU) 2019/943."’

(6a) in Article 6, paragraph 9, is amended as follows:

9. ACER shall submit opinions to the relevant regulatory authority and to the

Commission pursuant to Article 8(1) and 16(3) of Regulation (EU) 2019/943.”

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(7) Article 15 is amended as follows:

(a) in paragraph (4), the following subparagraph ▌ is added:

“’ ACER shall issue a report on the impact of using peak shaving products during

a crisis pursuant to Article 7a(5) of Regulation (EU) 2019/943 and a report

on the impact of developing peak shaving products under normal market

circumstances pursuant to Article 7a(4b) of Regulation (EU) 2019/943.

(b) the following paragraph is added:

“5. ACER shall issue a report analysing the national assessments of the flexibility

needs and providing recommendations on issues of cross-border relevance

regarding the findings of the regulatory authorities, or of other authorities or

entities designated by Member States, pursuant to Article 19c(7) of Regulation

(EU) 2019/943.”

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Article 5

Entry into force

This Regulation shall enter into force on the [twentieth] day following that of its

publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at ….

For the European Parliament For the Council

The President The President

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ANNEX II

2023/0077(COD)

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

amending ▌Directives (EU) 2018/2001 and (EU) 2019/944 to improve 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,

Having regard to the opinion of the Committee of the Regions,

Acting in accordance with the ordinary legislative procedure,

Whereas: