Electricity Market Design Reform 2024

The Electricity Market Design (EMD) Reform 2024 is a package of two EU legislative acts adopted in June 2024 that amend the Clean Energy Package‘s core electricity market legislation. It is the EU’s structural legislative response to the 2021–2022 energy price crisis and the challenge of integrating large volumes of variable renewable generation.

Legislative instruments

Background

Timeline:

• September 2021: Energy price crisis begins — gas price surge passes through to electricity via marginal pricing
• March 2022: Russian invasion of Ukraine accelerates price crisis; REPowerEU measures
• April 2022: ACER final assessment of wholesale electricity market design
• March 2023: Commission proposal for market design reform (COM/2023/148)
• November 2023: Provisional agreement on REMIT (alongside)
• December 2023: Provisional agreement on market design rules
• 21 May 2024: Adoption of Directive 2024/1711 and Regulation 2024/1747
• 26 February 2025: Affordable Energy Action Plan (COM/2025/79) published

Core objectives

1. Decouple consumer bills from short-term gas prices — long-term contracts (PPAs, two-way CfDs) provide price stability
2. Accelerate renewable deployment — better investment framework; Art. 19d mandatory CfDs for public support
3. Enable flexibility at scale — mandatory FNA; national flexibility objectives; support schemes; dedicated measurement devices
4. Improve grid access — flexible connection agreements; capacity publication requirements
5. Strengthen market oversight — expanded ACER cross-border enforcement role; enhanced REMIT

Key innovations by area

Investment support — Two-way CfDs (Regulation Art. 19d)

Public support for new wind, solar, geothermal, run-of-river hydro, and nuclear must be structured as two-way contracts for difference from 17 July 2027 (offshore hybrid projects: 17 July 2029). A two-way CfD:

• Provides a floor (minimum remuneration) protecting against low prices
• Imposes a ceiling (cap on excess remuneration) — above the strike price, revenues are redistributed to final customers
• Is voluntary participation; requires penalty clauses for early termination

This replaces feed-in tariffs and simple market premiums as the standard instrument for large-scale renewable support.

Power Purchase Agreements (Regulation Arts. 19a–19b)

Member states must:

• Remove unjustified PPA barriers
• Ensure guarantee schemes for buyer-default risk (accessible to smaller buyers)
• Allow subsidised projects to reserve capacity for PPAs

ACER assessed whether voluntary PPA templates were needed (published 15 October 2024) and concluded no new templates are required — existing industry/national templates already suffice, and stakeholders preferred flexibility over standardization. ACER publishes annual market assessments separately, ongoing. See Power Purchase Agreement.

Flexibility Needs Assessment (Regulation Art. 19e)

Creates the mandatory biennial national flexibility needs assessment (FNA). The most significant new instrument for distribution-level flexibility:

• Every 2 years; covers 5–10 year horizon
• Responsible body: national regulatory authority or designated entity
• ENTSO-E/EU DSO Entity develop methodology; ACER approves (deadline: 17 April 2025)
• Report covers: seasonal/hourly flexibility needs; demand response and storage potential; market barriers; digitalisation; cross-border potential
• Submitted to Commission and ACER; ACER issues cross-border analysis within 12 months

This article is the primary EU legal basis for Sweden’s Flexibility Need Assessment process and the FNAM methodology approved by ACER Decision 05-2025. See Flexibility Need Assessment.

National flexibility objectives (Regulation Art. 19f)

Within 6 months of the first FNA, each member state must define an indicative national objective for non-fossil flexibility, including specific contributions from demand response and storage. Must be reflected in National Energy and Climate Plans (NECPs). Sweden’s proposed objective is now in: Ei delivered R2026:07 on 2026-09-11, proposing 0 MW for both 2030 and 2035 — the government decision is still pending (expected ~Jan 2027, alongside the NECP update). See Flexibility Need Assessment.

Non-fossil flexibility support schemes (Regulation Arts. 19g–h)

Where investment in non-fossil flexibility is insufficient to meet the indicative objective, member states may apply capacity payment schemes for demand response and storage. Design principles:

• No excess over what is needed; new investment only
• Competitive, transparent, voluntary
• No fossil fuel start-up behind the meter
• Minimum market participation required; penalties for non-compliance

Flexible connection agreements (Directive Art. 6a)

Regulatory authorities must develop a framework for TSOs and DSOs to offer flexible connection agreements in areas with limited/no network capacity. Framework must ensure:

• Flexible connections don’t delay network reinforcement
• Conversion to firm connection when network is ready
• Flexible connections may be a permanent solution where reinforcement is not efficient (including for energy storage)

EU-level mandate for Villkorade Avtal-type mechanisms. Transposition deadline: general 17 January 2025 (Art. 6a is not covered by the later 17 July 2026 derogation). See Villkorade Avtal.

Energy sharing right (Directive Art. 15a)

Right to energy sharing for households, SMEs, public bodies — within the same bidding zone or a more limited geographical area. Key parameters:

• Facilities up to 6 MW capacity
• Third-party organiser may own/manage facility
• Shared electricity deducted within imbalance settlement period
• Transposition by 17 July 2026

Short-term market reforms (Regulation Arts. 7a, 7b, 8)

The EU-wide move to 15-minute day-ahead product intervals (implemented 30 September 2025) is a related, significant change for demand response and small-scale storage market access — but it is established by a different EU instrument, not by Regulation (EU) 2024/1747’s Art. 8. The 100 kW minimum bid size is, however, directly a product of this Regulation. It is a ceiling: in the Nordic and Baltic day-ahead market the trade lot was already 0.1 MW before the 15-minute go-live (Nord Pool SDAC 15-min product specifications).

Tariff reform (Regulation Art. 18)

Network tariff methodologies must now explicitly “support the use of flexibility services and enable the use of flexible connections” (Art. 18(2)(c)). This is a direct regulatory anchor for TOTEX-style DSO incentives — supporting Ei‘s ongoing reform toward lösningsneutralitet (solution neutrality) in Swedish revenue cap regulation. See Flexibility › The CAPEX bias problem.

DSO/TSO capacity publication (Regulation Art. 50(4a), Directive Art. 31)

• TSOs must publish capacity available for new connections monthly, with high spatial granularity
• DSOs must publish at least quarterly (Directive Art. 31) — high spatial granularity; includes flexible connection possibility in congested areas

Capacity mechanism changes (Regulation Art. 21, Art. 69(3))

• Capacity mechanisms no longer treated as measures of last resort; Commission may approve for up to 10 years (Art. 21(8), replacing the former paragraph 8; former paragraph 7 deleted)
• Streamlining process (Art. 69(3)): Commission report due 17 January 2025 (COM/2025/65 published February 2025)
• ACER requested to amend ERAA methodology for simplified approval (per the AEAP communication, see below — not stated in the Regulation text itself)
• Baltic states exempt from some balancing market requirements until Continental Europe synchronisation

ACER role expansions

Review clause

Commission to review the Regulation and submit a comprehensive report by 30 June 2026, with legislative proposal if appropriate. Focus: short-term market effectiveness and PPA market development.

Swedish transposition status

Sweden’s general transposition deadline was 17 January 2025. Key provisions and their Swedish status:

Affordable Energy Action Plan (COM/2025/79)

Published 26 February 2025, the AEAP is the first major Commission implementation document for the 2024 reform. Key figures (corrected 2026-09-18 against the full raw text — an earlier version of this page understated the qualifiers on all three):

• Avoiding an uncontrolled increase in grid management costs of up to EUR 26 billion by 2030 (a cost increase avoided, not a net saving)
• 40% lower wholesale prices on average from the combined effect of market integration, renewable generation, and flexible capacity together (not “up to 40% during peaks,” and not attributable to flexibility alone)
• Retail flexibility guidance (non-binding) due Q4 2025 (not Q1 2026 — that date belongs to a separate action, new rules on demand response)
• The ERAA-methodology amendment/CISAF claim previously listed under “Capacity mechanism changes” does not appear in the AEAP text at all — see Source - Capacity Mechanisms (EC DG ENER) instead, which independently and correctly attributes the ERAA-amendment request to the streamlining report (COM/2025/65), not to this Communication

Follow-on proposal — COM(2026) 600 (July 2026)

On 17 July 2026 the Commission proposed a further amendment of the Electricity Regulation (COM(2026) 600): a new Art. 18 on network charges (capacity and time-of-use elements, anticipatory investment in the cost base, DSO efficiency comparison every four years), Art. 18a on smart grid indicators and grid data, Art. 18b setting smart-meter targets of 50% of final customers by 2030 and 75% by 2033, Art. 18c on taxing electricity no higher than natural gas, and Art. 18d on connection prioritisation in congested grids. It is a legislative proposal adopted without an impact assessment, not the review report due under this page’s review clause, and the co-legislators have not acted on it in any source held here. The industry response is in DSO Entity’s reaction.

Data gaps

• Commission review report (30 June 2026) — still unpublished as of early October 2026 (searched 2026-08-16 and again 2026-10-04). Not to be confused with two adjacent Commission instruments that do exist: the Art. 69(3) capacity-mechanism streamlining assessment (March 2025) and COM(2026) 850 final below, neither of which is this review
• Standalone flexibility-remuneration guidance as a distinct instrument — whether the Commission still intends one beyond COM(2026) 850 and the Citizens Energy Package Action 6 deliverable, or treats the question as closed; the concrete binding instrument remains the 2027 Implementing Regulation on data interoperability