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Reform of the EU electricity market: Local action for boosting the energy transition  

The EU's climate objectives will require an almost completely decarbonised electricity system by 2035, which is why regions and cities are urging the co-legislators to agree on an ambitious EU electricity market design. The European Committee of the Regions (CoR) points out that energy transition requires flexible, decentralised solutions, which shall be supported by local and regional authorities. The opinion drafted by Josef Frey (DE/The Greens), Member of Baden-Württemberg State Parliament, was adopted unanimously at the CoR plenary session on 5 July.

Energy prices have escalated since 2021 with very negative social and economic consequences. Local and regional leaders believe that there is an urgent need to protect consumers in the face of rising energy prices, to deal with rising volatility and improve transparency in the price formation process. With a reform of the EU electricity market design, the European Commission wants to respond to these challenges, boost renewables and enhance industrial competitiveness. However, on 19 June, the EU's energy ministers failed to reach a common position on the electricity market reform. The talks will continue under the Spanish EU Council Presidency.

The CoR opinion underlines that strengthening the local and regional dimension would contribute to energy security, local value creation and produce economic benefits. Therefore, local and regional authorities should develop a roadmap for climate-friendly energy supply for their region in line with the climate targets, designate appropriate areas for renewables and necessary infrastructure and develop "one stop shops" to facilitate the energy transition. Citizens, small and medium-sized enterprises and local and regional authorities should also be given the opportunity to invest in and profit financially from local generation facilities.

"The task of local and regional authorities is to enable the energy transition on local and regional level by taking local responsibility and offering services to the citizens in the region through one-stop-shops. Facilitating the energy transition on the ground and ensuring participation of all citizens and the industry at local level can bring added value to the energy transition and the functioning a electricity markets. In the context of the current energy challenges, a decentralised scheme is more suitable to safeguard the grid and reach the EU climate neutrality target", rapporteur Josef Frey, Member of Baden-Württemberg State Parliament, said.

"Energy communities can have a key contribution in involving citizens and making the energy transition happen on local level. Consumers should be encouraged to transition into active producers and consumers - prosumers. Small renewable energy systems can also contribute to making the consumers less dependent on global commodity prices and create local support for the energy transition", Mr Frey believes.

Regions and cities are proposing that the EU renewable energy financing mechanism should be used to fill potential gaps between the contributions of Member States and the target share of 45% from renewable sources in the Union's gross final consumption of energy in 2030, set in the Renewables Directive. Direct price support schemes for new investments shall only be open to technologies that are renewable, non-CO2 emitting, low-cost and available for a rapid roll out, which excludes nuclear power. The Member States should also be required to put in place national strategies for the progressive reduction of existing coal, fossil gas and other fossil fuel generation, mining and transport capacity.

The so-called two-way contracts for difference – contracts signed between an electricity generator and a public entity with the aim to stabilise prices – should be designed with the aim of cost neutrality. Any additional revenues should be allocated to support vulnerable consumers, low-income households and vulnerable customers in the energy-intensive industry, or to finance one-stop shops. Furthermore, the CoR calls to consider locational criteria for investments in renewables, storage and demand response to ensure optimal integration of renewable energy and to enable less developed regions to reap the benefits of cheap renewable energy.

Renewable energy communities involve citizens on local level and support public acceptance for the energy transition. Therefore, they should benefit from priority use of public spaces, priority treatment for obtaining grid connections and technical assistance and streamlined procedures for energy sharing. Furthermore, all households should have the right to connect renewable energy systems of up to 1kW for self-consumption without further requirements.

Regions and cities also urge the Commission to press ahead with the integration of markets across borders, as border regions are hubs between Member States and with third countries. The aim should be allowing energy communities and energy sharing across borders.

More information: Q&A on the revision of the EU's internal electricity market design (European Commission)


Lauri Ouvinen

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