Electricity market design

This past year of energy crises has put our energy consumption in the limelight. Whether it’s governments, businesses or individual consumers, everyone is thinking about how to reduce energy consumption. The impetus behind that is often to reduce energy bills but also stems from an increased awareness of the geopolitics of energy (and how our gas dependence has helped Putin) as well as the increasingly salient urgency of climate action.

These crises also highlighted potential flaws in the set up of the EU’s electricity market, and especially how skyrocketing gas prices dramatically drove up electricity prices as well. As an answer to this flaw and to prevent future crises, the Commission recently proposed a set of modifications to the design of the electricity market. Interestingly for EuropeOn and our members, many of the proposed changes are demand-side, where electrical contractors operate.

Indeed, this revision aims to further protect and empower consumers as well as to facilitate the integration of (variable) renewables by incentivising flexibility demand response and storage.

Consumers across Europe will have the right to subscribe to multiple contracts with multiple metering points so as to enable them to make the most of dynamic pricing contracts when sensible while keeping a share of their consumption under fixed price contracts. The idea is that consumers could, for instance, use dynamic pricing to cover their EV charging consumption, by tapping into times of low prices through smart charging, while using fixed contracts for their traditional household power consumption, and ensure that cooking dinner does not come with disproportionate energy costs.

This means electrical contractors will be increasingly solicited by EU consumers to facilitate their shift to optimised and cheaper energy consumption. We have already noticed consumer behaviour gradually shifting towards more awareness of their energy consumption patterns, which is poised to further grow thanks to, among others, these possibilities for more flexibility.

While this proposal emphasizes demand side flexibility options, incentives and obligations in this regard also impact supply side players. Grid operators will have to starting thinking more about tapping into non-fossil flexibility options, especially demand-side options, to stabilise their grids. Further, national energy regulators will have a new obligation to assess their country’s need for flexibility, and especially non-fossil options, demand-response and/or storage, to then set an indicative objective for the latter.

On top of system flexibility, this revision introduces a new right: the right to energy sharing. While this was already possible before, this revision reinforces the possibility for a group of consumers to share energy amongst themselves, to collectively self-consume energy. On top of installing, electrical contractors will most likely have an additional role to play in such situations where a group of citizens want to invest in renewable electricity generation, to advise them about the type installation that is most suited to their needs and aims.

Net-Zero Industry Act

While electrical contractors will be called upon to implement these provisions, the question of the available workforce will become increasingly ubiquitous. However, the Commission also recently released its response to the US Inflation Reduction Act, with the Net-Zero Industry Act, which also aims to address the skills needed for our net-zero industry (as announced in the earlier Green Deal Industrial Plan). While this Act mainly seeks to address European manufacturing of clean technologies, it brings fresh ideas for the EU to act on skills.

The Act proposes to establish a Net-Zero Platform, composed of the Commission and Member States, which would support the availability and deployment of skills in net-zero technologies, including skills for the installation, commissioning, maintenance and operation of these technologies. To this end, this Platform would “assist the Commission in assessing, continuously monitoring and forecasting the demand and supply of a workforce with the skill sets needed in net-zero technologies availability and uptake of corresponding education and training opportunities”.

This is a welcome ambition for EuropeOn, as we have been calling for such an assessment to be added to obligations under the Directive for Energy Efficiency, Renewable Energy and the Energy Performance of Buildings.

Finally, the Platform would also assist the Commission in setting up Net-Zero Academies in Member States, which would work on related learning programmes, on the transparency and mobility of skills. This is a new concept and we are keen to further understand what the Commission has in mind with this.

We look forward to cooperating with EU institutions to ensure this ambition can be a success!