The European Parliament has officially adopted new reforms for the EU electricity market. The measures, first proposed in March 2023 and approved by the European Council in October 2023, now need to be formally adopted by the European Council to become law.

According to the European Parliament’s website, the reforms are focused on encouraging long-term contracts for non-fossil energy, introducing cleaner flexible solutions, and increasing market transparency. It said the reforms will help to create a more resilient and sustainable energy market.

The legislation includes introducing two-way CfD in all investments in new electricity generation, whether from renewable or nuclear energy, with national authorities to agree with electricity producers on predefined ranges for energy prices. In areas where two-way CfDs are not relevant, the legislation promotes power purchase agreements.

The legislation also establishes a mechanism to declare electricity price crises. In situations of very high prices or under certain conditions, the European Union will be able to declare regional or EU-wide electricity price crises. This will allow member states to take temporary measures to set electricity prices for both small- and medium-sized enterprises and energy intensive industrial consumers.

There are also measures geared toward protecting consumers against volatile prices, including giving customers the right to access fixed-price contracts or dynamic price contracts and receive important information on the options they sign up to. Suppliers will not be allowed to unilaterally change the terms of a contract, while EU countries will have the right to prohibit suppliers from cutting the electricity supply of vulnerable customers.

Member of European Parliament Nicolás González Casares said the reforms put citizens at the forefront of the electricity market design.

“The text includes measures to protect citizens, especially the most vulnerable and to accelerate the deployment of renewable energy sources,” he said. “The parliament has taken a step forward in democratising energy, creating a market design that responds to the failures exposed by the energy crisis. All consumers, including micro, small, and medium-size enterprises will have access to long-term, affordable and stable prices.”

SolarPower Europe formally praised the reforms in December 2023, when the European Parliament and European Council reached a provisional agreement on the matter.