32019R0943

WHAT IS THE AIM OF THE REGULATION?

Regulation (EU) 2019/943, as amended by Regulation (EU) 2024/1747, lays out a basis for achieving the energy union and climate neutrality goals by 2050 in the European Union (EU) by:

• promoting efficiency, renewable energy and decarbonisation;
• setting principles for integrated electricity markets, which allow all resource providers and electricity customers non-discriminatory market access and enable the development of forward electricity markets to allow suppliers and consumers to hedge or protect themselves against the risk of future volatility in electricity prices;
• encouraging competition, security of supply and flexible non-fossil solutions;
• establishing fair rules for cross-border electricity exchanges and pricing;
• supporting transparent wholesale markets for reliable electricity supply;
• encouraging long-term investment in renewable energy and grids to ensure affordable prices;
• providing a framework for addressing electricity price crises.

KEY POINTS

Principles

The regulation sets out principles on which electricity markets should be operated, including to:

• encourage free price formation and avoid measures that prevent price formation on the basis of supply and demand;
• facilitate the development of more flexible generation, sustainable low-carbon generation and more flexible demand;
• provide the opportunity for consumers to act as market players in the energy market and in the energy transition;
• permit the decarbonisation of the electricity system, including making it possible to integrate electricity produced from renewable energy sources and providing incentives for energy efficiency;
• provide incentives for investment in production, in particular long-term investment in a low-carbon and sustainable electricity system;
• facilitate the progressive removal of obstacles to cross-border flows of electricity between bidding zones¹ or EU Member States and to cross-border transactions on electricity and related service markets;
• allow the development of demonstration projects in sustainable, safe and low-carbon energy sources, technologies or systems to be carried out and used for the benefit of society.

Just transition

The European Commission must help Member States address the social and economic impacts of the transition to clean energy, including by supporting national strategies to reduce the extraction of coal and other solid fossil fuels.

Network access and capacity management

• Member States must take all appropriate measures to remedy congestion².
• Bidding zones should therefore be defined in such a way as to ensure market liquidity, efficient congestion management and overall market efficiency.
• The European Network of Transmission System Operators for Electricity should report every three years on structural and other major physical congestion within and between bidding areas, including the location and frequency of such congestion.
• Any Member State with identified structural congestion then decides, in cooperation with its transmission system operators³, either to establish national or multinational action plans in order to increase the cross-border capacity available for trade or to revise or amend its bidding zone configuration.

Capacity mechanism

• The regulation sets out the conditions under which Member States could set up capacity mechanisms⁴ and the principles for creating them.
• These mechanisms aim to ensure that electricity supply is sufficient during peak periods by remunerating resources for their availability. They should be designed to address an identified problem of resource adequacy and be open to cross-border participation.
• A European generation adequacy assessment is introduced to verify if the introduction of capacity mechanisms is justified. Member States introducing capacity mechanisms also need to notify the Commission of implementation plans to improve market functioning.
• The Commission can approve capacity mechanisms for a maximum of 10 years.
• An emission limit of 550 g of fossil carbon dioxide (CO₂) per kWh of electricity is put in place. New power plants that emit more than that and start commercial production after the regulation comes into force are no longer able to participate in capacity mechanisms.
• Existing power plants emitting more than 550 g of fossil CO₂ per kWh and an average of 350 kg of CO₂ per year per kW installed will not be able to participate in capacity mechanisms after 1 July 2025.
• Capacity contracts concluded before 31 December 2019 are not affected by the rules.

Incentives to achieve decarbonisation

Amending Regulation (EU) 2024/1747 introduces investment incentives to achieve decarbonisation and to protect electricity consumers from price volatility.

• Member States will promote the uptake of power purchase agreements – long-term contracts for the purchase of electricity from an electricity producer on a market basis. These are designed to provide stability for both customers and investors by providing price predictability and to help Member States reach the decarbonisation objectives set out in their integrated national energy and climate plans.
• To support new investments in new power-generating projects based on solar, wind, geothermal and hydropower, Member States will also introduce two-way contracts for difference, or equivalent schemes, with public entities. These would ensure energy generators receive a minimum remuneration in low-price periods, and they would pay back excess revenues in high-price periods to be used for developing distribution grids or to reduce prices paid by consumers.
• The amending regulation sets out design principles for non-fossil flexibility support schemes and requires Member States to define an indicative national objective for non-fossil flexibility, including the respective specific contributions of both demand response and energy storage to that objective.

Regional coordination centres

• These centres support the regional coordination of transmission system operators.
• They replace the existing regional security coordinators but have additional tasks related to system operation, market operation and risk preparedness.
• The regulation also creates an EU distribution system operators⁵ entity working in the common interest of the EU.

Electricity price crisis

Where there is a sharp increase in electricity retail prices or there are very high prices in wholesale electricity markets, Directive (EU) 2019/944 on the internal market in electricity provides that the Council of the European Union may declare a regional or an EU-wide electricity price crisis on the basis of a proposal from the Commission.

Where such a crisis is declared, Member States may request system operators to propose the procurement of peak-shaving products⁶ in order to achieve a reduction of electricity demand during peak hours.

Repeal

Regulation (EU) 2019/943 repealed Regulation (EC) No 714/2009 with effect from 31 December 2019.

FROM WHEN DOES THE REGULATION APPLY?

Regulation (EU) 2019/943 applied from 1 January 2020.

Amending Regulation (EU) 2024/1747 applied from 16 July 2024.

BACKGROUND

For further information, see:

• Clean energy for all Europeans package (European Commission)
• Energy union (Council of the European Union).

KEY TERMS

1. Bidding zone. The largest geographical area within which market participants are able to exchange energy without capacity allocation.
2. Congestion. A situation in which all requests from market participants to trade between network areas cannot be accommodated because they would significantly affect the physical flows on network elements that cannot accommodate those flows.
3. Transmission system operator. A person who is responsible for operating and developing the electricity transmission system in an area, and its interconnections with other systems, and for ensuring the long-term ability of the system to meet reasonable demands for the transmission of electricity.
4. Capacity mechanism. A temporary measure to ensure the achievement of the necessary level of resource adequacy by remunerating resources for their availability, excluding measures relating to ancillary services or congestion management.
5. Distribution system operator. A person responsible for operating and developing the electricity distribution system in an area, and its interconnections with other systems, and for ensuring the long-term ability of the system to meet reasonable demands for the distribution of electricity.
6. Peak shaving product. A market-based product by means of which market participants are able to reduce electricity consumption at peak hours at the request of the system operator.

MAIN DOCUMENT

Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (OJ L 158, 14.6.2019, pp. 54–124).

Successive amendments to Regulation (EU) 2019/43 have been incorporated into the original text. This consolidated version is of documentary value only.

RELATED DOCUMENTS

Regulation (EU) 2019/941 of the European Parliament and of the Council of 5 June 2019 on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC (OJ L 158, 14.6.2019, pp. 1–21).

Regulation (EU) 2019/942 of the European Parliament and of the Council of 5 June 2019 establishing a European Union Agency for the Cooperation of Energy Regulators (OJ L 158, 14.6.2019, pp. 22–53).

See consolidated version.

Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU (OJ L 158, 14.6.2019, pp. 125–199).

See consolidated version.

Directive (EU) 2018/844 of the European Parliament and of the Council of 30 May 2018 amending Directive 2010/31/EU on the energy performance of buildings and Directive 2012/27/EU on energy efficiency (OJ L 156, 19.6.2018, pp. 75–91).

Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the Energy Union and Climate Action, amending Regulations (EC) No 663/2009 and (EC) No 715/2009 of the European Parliament and of the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/EU, 2012/27/EU and 2013/30/EU of the European Parliament and of the Council, Council Directives 2009/119/EC and (EU) 2015/652 and repealing Regulation (EU) No 525/2013 of the European Parliament and of the Council (OJ L 328, 21.12.2018, pp. 1–77).

See consolidated version.

Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources (OJ L 328, 21.12.2018, pp. 82–209).

See consolidated version.

Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC (OJ L 315, 14.11.2012, pp. 1–56).

See consolidated version.

Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildings (OJ L 153, 18.6.2010, pp. 13–35).

See consolidated version.