Proposed changes to electricity market reform could lead to regulatory uncertainty for investors

One of the key points of the proposal for EU electricity market reform focuses on developing longer-term contracts by strengthening the market for power purchase agreements (PPAs) and bilateral contracts for difference (CfDs) for new investments in renewable energy and nuclear power generation. Experts nevertheless warn that unclear definitions of these rules and the proposed changes could lead to increased regulatory uncertainty for investors if they are interpreted differently by individual Member States.

The original proposal published by the European Commission aims to preserve competition and support the further development of the internal electricity market, which has been operating in the European Union for more than three decades. The efficient continued functioning of the marginal pricing system is key to the development of the internal market. Under this system, prices are set through wholesale markets where electricity is traded freely, and generators receive the price set by the most expensive source. At the same time, market participants can also enter into bilateral contracts for difference (CfDs).