Electricity Market Regulation 2019/943

Full title: Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast) Part of: Clean Energy Package Published (OJ): 14 June 2019. Entered into force: ~4 July 2019 (20 days after publication). General application: from 1 January 2020 (directly applicable — no transposition needed), except Arts. 14, 15, 22(4), 23(3)/(6), 35, 36, and 62, which applied from entry into force. Consolidated version: 16 July 2024

Summary

The Electricity Market Regulation (EMR) establishes the rules for how wholesale electricity markets function across the EU, including cross-border trading, capacity allocation, congestion management, and balancing. Unlike the Directive (which Member States must transpose into national law), a Regulation is directly applicable in all Member States. For the wiki’s purposes, it defines the market architecture within which flexibility operates: bidding zones, capacity calculation, redispatching, and the principles that demand response and storage must be treated equally with generation.

Key provisions for flexibility

Market principles (Article 3)

Article 3 establishes overarching principles that all market rules must follow. For flexibility, the critical ones are:

• Art. 3(c): market rules shall facilitate more flexible generation, sustainable low-carbon generation, and more flexible demand
• Art. 3(e): aggregation of generation and load from multiple facilities must be enabled for joint market participation
• Art. 3(g): investment incentives for generation, energy storage, energy efficiency, and demand response to meet market needs
• Art. 3(j): generation, energy storage, and demand response shall participate on equal footing — the non-discrimination principle
• Art. 3(m): rules shall enable efficient dispatch of generation, storage, and demand response

These principles are legally binding and shape how national regulators and TSOs/DSOs must design market rules.

Balance responsibility (Article 5)

All market participants are financially responsible for their imbalances. This applies to flexibility providers too — aggregators and DR providers must either be balance responsible parties or delegate to one. Derogations exist for demonstration projects, small renewables (<400 kW, dropping to <200 kW from 2026), and installations benefiting from Commission-approved State aid commissioned before 4 July 2019.

Balancing market (Article 6)

Balancing markets must be organized to:

• Ensure non-discriminatory access for all market participants including DR, storage, and aggregation (Art. 6(1)(c))
• Accommodate increasing variable generation, increased demand responsiveness, and new technologies (Art. 6(1)(d))
• Use marginal pricing (pay-as-cleared) for balancing energy settlement (Art. 6(4))
• Allow bidding as close to real time as possible (Art. 6(4))
• Procurement of balancing capacity must be market-based and non-discriminatory (Art. 6(8))

This is the EU-level legal framework for the Nordic balancing markets (FCR, aFRR, mFRR) that Svenska kraftnät operates.

Redispatching (Article 13)

Redispatching (adjusting generation/load to relieve congestion) must be:

• Market-based — resources selected using market mechanisms, financially compensated (Art. 13(2))
• Open to all technologies including DR, storage, and resources in other Member States, unless technically not feasible (Art. 13(1))
• Non-market-based redispatching is only permitted where: no market alternative exists; all available market-based resources have already been used; too few facilities exist for effective competition; or the congestion is regular/predictable and covered by an action plan or Art. 16(8) compliance (Art. 13(3))

For non-market-based redispatching, renewables get priority protection: they can only be curtailed if no other alternative exists, or if other solutions would result in significantly disproportionate costs or severe risks to network security (Art. 13(6)(a)).

Crucially, Art. 13(7) establishes that producers who “accepted a connection agreement under which there is no guarantee of firm delivery of energy” are not entitled to financial compensation for non-market redispatching. This has implications for Villkorade Avtal-style arrangements at EU level.

Bidding zone review (Article 14)

Bidding Areas must be based on long-term, structural congestions in the transmission network (Art. 14(1)). They should not contain structural congestions unless these don’t affect neighbors or are mitigated by remedial actions. ENTSO-E must report on structural congestion every three years.

If structural congestion is identified, the Member State must either:

• Establish an action plan (Art. 15) to address congestion within four years, or
• Review and amend its bidding zone configuration

This process is directly relevant to Sweden’s SE1–SE4 configuration — the north-south bottleneck is structural congestion that Sweden addresses through the NordSyd initiative (an action plan approach) rather than reconfiguring bidding zones.

The 70% minimum capacity rule (Article 16(8))

The most numerically precise flexibility-relevant rule in EU law:

• For flow-based borders: at least 70% of the capacity of internal and cross-zonal critical network elements must be available for cross-zonal trade
• For NTC borders: at least 70% of transmission capacity (after contingency deduction) must be available
• The remaining 30% can be used for reliability margins, loop flows, and internal flows

This rule drives the need for Flow-Based Capacity Calculation and constrains how much internal congestion a Member State can use to limit cross-border trade. Sweden’s transition to flow-based in October 2024 is partly motivated by this requirement.

Derogations are possible on operational security grounds (Art. 16(9)) — granted one year at a time, renewable once for up to two years total provided the extent of the derogation decreases significantly after the first year.

Capacity mechanisms (Articles 20–27)

Before introducing capacity mechanisms, Member States must first identify regulatory distortions (Art. 20) and cannot actually introduce the mechanism until the resulting implementation plan has received a Commission opinion (Art. 21(1), (5)). Capacity mechanisms must be temporary, technology-neutral, and open to cross-border participation. Generation exceeding 550 g CO₂/kWh cannot be paid regardless of age; for facilities that started commercial production before 4 July 2019, exclusion additionally requires exceeding 350 kg CO₂/kW per year — both thresholds must be exceeded, not one or the other.

Relevance to the wiki

This Regulation provides the market architecture within which all flexibility mechanisms operate:

1. The equal footing principle (Art. 3(j)) is the legal foundation for demand response and storage participating alongside generation in all markets — this drives the opening of balancing markets to flexibility
2. The 70% rule (Art. 16(8)) creates a hard floor on cross-border capacity, limiting how much TSOs can constrain trade to manage internal congestion — this forces investment in either grid expansion or flexibility solutions
3. Market-based redispatching (Art. 13) establishes that congestion management should be a market activity, not an administrative one — this principle cascades down to DSO-level flexibility procurement
4. Bidding zone review (Art. 14) puts ongoing pressure on Sweden to either resolve the SE1–SE4 structural congestion (via NordSyd and flexibility) or reconfigure zones
5. Balance responsibility (Art. 5) ensures flexibility providers face the same accountability as generators, supporting market integrity

The Regulation and the Directive together form the complete legal framework: the Regulation sets the wholesale/cross-border market rules, the Directive sets the retail/distribution/consumer rules.