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
• 16 July 2024: Reform enters into force
• 17 January 2025: General transposition deadline (Directive)
• 30 September 2025: Day-ahead 15-minute intervals implemented
• 26 February 2025: Affordable Energy Action Plan (COM/2025/79) published
• 17 July 2026: Transposition deadline for flexible connections and energy sharing (Art. 6a, Art. 15a)

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 must develop voluntary PPA templates and publish annual market assessments. 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).

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 by 17 July 2026. 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 100 kW minimum bid and 15-minute granularity are particularly significant for demand response and small-scale storage market access.

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. 69)

• Capacity mechanisms no longer treated as measures of last resort; Commission may approve for up to 10 years
• Streamlining process: Commission report due 17 January 2025 (COM/2025/65 published February 2025)
• ACER requested to amend ERAA methodology for simplified approval
• 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:

• Flexibility could save EUR 26 billion in grid costs by 2030
• Up to 40% wholesale price reduction potential during peaks
• Retail flexibility guidance (non-binding) due Q1 2026

Data gaps

• ACER voluntary PPA templates — assessment was due by 17 October 2024; outcome unknown; templates if approved
• Commission review report (30 June 2026) — not yet published
• Commission retail flexibility guidance — promised Q1 2026 under COM/2025/79; no standalone guidance document published; substantive content on flexible retail contracts appears in Citizens Energy Package Action 6 (March 2026, guidance on flexibility remuneration listed as its own deliverable); concrete implementing instrument is the 2027 Implementing Regulation on data interoperability; standalone guidance may be effectively superseded by the CEP