Statement on Electricity Market Design Reform: Energy Storage as a Cornerstone in Decarbonisation and Energy Security

On 14 December 2023, the Council and Parliament reached a provisional agreement to reform the EU's Electricity Market Design (EMD), with the goal of reducing dependence on volatile fossil fuel prices. The text emphasises energy storage as a key solution in achieving energy security and decarbonisation. 

EASE Head of Policy Jacopo Tosoni's statement: 

On the importance of the Electricity Market Design reform: 

“Following the energy crisis, it was essential to present new legislation able to address the concerns of citizens and Industry. EASE believes the European Union was able to strike the right balance between public involvement and market-based mechanisms. This new legislation focuses extensively on flexibility – and rightfully so: ensuring sufficient energy storage is deployed is crucial to prevent energy price spikes and gas import dependency. This reform will have a big impact on the energy storage sector”. 

On the role and design of Capacity Mechanisms:  

"Capacity Mechanisms should promote green flexibility. The decision to keep subsidising fossil fuels power plants through capacity mechanisms, albeit under strict conditions, is a step in the wrong direction. EASE believes that this approach hinders grid decarbonisation and furthers dependency on gas imports. In the event Member States choose to implement new Capacity Mechanisms, EASE is confident that they will formulate these mechanisms in line with decarbonisation objectives”. 

On the significance of Power Purchase Agreements (PPAs):  

“The reform promotes PPAs as a key instrument in enhancing market access to long-term contracts. They are a source of long-term revenue stream for energy storage: the reform will incentivise the PPAs market and consequently facilitate investments in new energy storage projects.” 

"All in all, the new reform marks a pivotal moment for energy storage, as it becomes a key focus among European policymakers. The introduced provisions are poised to significantly accelerate energy storage deployment. EASE commends policymakers for swiftly reaching an agreement since the March Commission's proposal." 

Next steps: 

• The provisional agreement reached by the co-legislators currently awaits approval and formal adoption by both institutions. 
• EASE will support Member States in setting up new Capacity Mechanisms, helping design auctions that reward clean solutions over fossil fuels. 
• EASE will spearhead efforts to foster the 24/7 PPA market, which will play a key role in decarbonising and strengthening the grid.