In 2023, the European Parliament and Council reached a compromise on the reform of the Electricity Market Design (EMD). The EU electricity market reform, which is also called the „Electricity Internal Market Directive,“ amends the old Regulation EU 2019/943 on the internal market for electricity. Supporting this, the amending Directive EU 2024/1711, an amendment to Regulations EU 2024/1747 and EU 2019/942 (ACER), and new REMIT rules on market surveillance entered into force in summer 2024. Additionally, at the same time, the EU Commission published an „Action Plan for Affordable Energy,“ which aims to... annual relief of 260 billion euros shall. It contains three guidelines for EU countries on how to reduce energy costs:
- Accelerated deployment of innovative renewable technologies Create clear regulatory and support frameworks for new technologies and applications (e.g., marine energy, floating wind, agri-PV, or floating PV) to specifically support market launch, investment, and research and innovation.
- Faster approvals for grid infrastructure and storage facilities: Accelerate the expansion of power grids and storage solutions, including by designating special infrastructure areas where planning and approval procedures can be simplified.
- Future-proof grid fees for an efficient energy system: Design grid fees to promote flexibility, optimally utilize existing infrastructure, and incentivize consumers for grid-friendly electricity consumption.
Goals of the EU electricity market reform
The central goals of the EU electricity market reform are to make the European electricity market more resilient, reduce price volatility, and at the same time strengthen investments in renewable energies and flexibility options. Specifically, electricity prices should in the future depend less on fluctuating fossil fuel prices, thereby gaining long-term stability. At the same time, consumers should be better protected from price spikes and their position in the market strengthened, for example through greater choice in electricity contracts and an improved crisis mechanism. Furthermore, the reform aims to accelerate the expansion of renewable electricity generation and to better integrate flexibility options such as demand response and energy storage into the electricity system.
First steps taken by the EU
Among the EU electricity market reform measures already implemented, particular attention is paid to the further development of wholesale electricity trading mechanisms. A key step was the transition of the European Day-Ahead Markets on 15-minute trading intervals. The higher temporal resolution has been in effect since September 2025 and enables a significantly more precise representation of supply and demand in the electricity system. The EU aims to better accommodate short-term fluctuations—such as those caused by weather-dependent renewable energy sources—more easily integrate the growing share of variable renewable generation, and increase the flexibility and reliability of the European electricity system.
In addition, the EU has harmonized the European wholesale market to a Marginal price system („Pay-as-Clear“) In this market design, bids from electricity generators are sorted by their marginal costs—from the cheapest to the most expensive generation source. Demand is then met step by step using the cheapest bids until it is fully satisfied. The price of the last power plant needed—that is, the most expensive bid still being used—determines the market price. All generators whose bids are accepted receive this uniform price for the amount of electricity fed in.
Central Market Instruments: PPAs & CfDs Instead of the EEG Market Premium
As the first central measure of the EU electricity market reform, the reform package strengthens long-term electricity supply contracts. Power Purchase Agreements (PPAs) should be facilitated, for example by removing regulatory hurdles and through public or private guarantee instruments and possible PPA pools. At the same time, bilateral Contracts for Difference (Contracts for Difference – CfDs) have been established as a central support instrument for state-backed investments in new generation capacity. Revenues from such models are to be passed on to end customers or used to finance price hedging measures. Member states retain discretion as to whether they focus more on privately financed PPAs or publicly backed CfD models.
More choice for consumers thanks to the EU electricity market reform
The Consumer protection is strengthened. End customers will have more choice between fixed-price contracts and dynamic tariffs, while suppliers will be obligated to transparently present the respective risks and benefits. Unilateral contract changes to the detriment of customers will be restricted, and vulnerable consumers will be strengthened. A temporary Cap on electricity prices The EU electricity market reform also provides for a mechanism for SMEs and energy-intensive industries. The mechanism is triggered as soon as a member state identifies a regional electricity price crisis or the EU intervenes on a Europe-wide basis.
Easier access to short-term markets
To facilitate the participation of smaller plants and aggregators in the short-term electricity markets, the EU is lowering, for example, the Minimum bid size in day-ahead and intraday trading from 500 kW to 100 kW. In addition, the Participation in Demand Response and Energy storage systems specifically strengthened. If EU member states wish to use capacity mechanisms or flexibility instruments, the Commission has promised to provide quick and straightforward reviews and approvals.
Strengthening the Instruments and Market Oversight for the EU Electricity Market Reform
The EU electricity market reform also strengthens these instruments by REMIT Regulation tightened and the powers of ACER is significantly expanding. To combat market manipulation and insider trading more effectively, the EU is expanding monitoring requirements and demanding significantly greater transparency from market participants. Improved data collection helps to immediately identify suspicious market movements and directly investigate violations.
In parallel, ACER assumes a central leadership role. It coordinates national regulatory authorities, develops unified market rules, and makes binding decisions in case of disagreements. With additional resources, the agency primarily monitors cross-border trade and advises the EU on infrastructure expansion. Together, these measures ensure the integrity and stability of the European internal energy market.
Germany's Implementation Framework for the EU Electricity Market Reform
Regulation (EU) 2024/1747, also known as the„EU Electricity Market Regulation“ designation, is directly applicable and binding in Germany. It requires adjustments in energy law, market rules, and network codes – for example, regarding minimum bid sizes, the design of the forward market, and the role of the central tendering platform. The parallel adopted Directive (EU) 2024/1711, known as the „Electricity Internal Market Directive (IEMD)“, on the other hand, must by July 17, 2026 into national law to be implemented. This primarily affects the Energy Industry Act (EnWG), possibly the Renewable Energy Sources Act (EEG), as well as subordinate ordinances such as the Electricity Supply Ordinance (StromGVV) and supply regulations.
Current Status of Implementation (March 2026)
Legal expert commentaries and industry analyses suggest that the BMWK is currently Referent's draft for the implementation of the amended EMD Directive prepared, which integrates essential parts directly into the EnWG. Germany used transitional rules for cross-border trading capacities (minRAM) until the end of 2025. Experts expect the adaptation of relevant network codes such as „Forward Capacity Allocation“ by mid-2026. In parallel, Discussions on the design of bilateral CFDs, to the Promotion of Long-Term PPAs and to the Adaptation of Capacity Mechanisms, to fully meet the EU requirements.
German EEG Transformation: CfDs & PPAs
The previous EEG funding as sliding market premium The OPEX model is to be transitioned to a system of two-sided CfDs by July 2027 at the latest, as the EU electricity market reform effectively mandates this. In parallel, the PPA market will be strengthened as a second pillar. The federal government and the „Renewable Market Offensive“ are developing clear frameworks so that CfD funding and unsubsidized PPAs function complementarily and cannibalization effects are minimized. A central point of contention remains the switching option between state-backed CfDs and green electricity PPAs – studies warn that the elimination of this flexibility could slow down short-term PPAs and the market orientation of renewable energy plants.
EnWG Adjustments: Dynamic Tariffs & Flexibility
The EnWG already contains regulations on variable and dynamic electricity tariffs (§ 41a EnWG), after which suppliers must offer variable rates for smart meter customers – a precursor to the EMD requirements for contract choice and dynamic pricing. § 14a EnWG was recently further developed so that household customers with controllable consumption devices (e.g., heat pump, wallbox, storage >4.2 kW) Time-variable grid charges receive; these dynamic network charges will be introduced nationwide in 2026 and will serve as a central lever for flexibility. Further amendments to the EnWG and subordinate regulations on end-customer contracts are planned for the full implementation of the extended consumer rights (choice between fixed-price, variable, and dynamic tariffs as well as crisis mechanisms).
Capacity Mechanisms & Power Plant Strategy
In 2024, the BMWK already presented an „Options Paper on Future Electricity Market Design,“ which recommends, among other things, a decentralized capacity market with a central component (KKM) to combine investment security and innovation. Based on the power plant strategy, the Federal Government and the EU Commission agreed in early 2026 to hold tenders for around 10 GW (20 GW planned) new capacity through Gas power plants and 2 GW technology-neutral without a runtime criterion, to which also Large-scale battery storage can apply. For 2027 and 2029, fully technology-open tenders will follow, in which storage, demand side response, and EE hybrids can participate – in line with the eased admissibility of capacity mechanisms according to EMD.
Schedule & Open Questions Regarding the Implementation of the EU Electricity Market Reform
The EU Electricity Market Regulation is already in effect; Germany is gradually adapting network codes, auction designs, and market rules (e.g., flexibility targets, forward markets). The EMD directive must be implemented by July 2026, with EnWG and EEG amendments for CfD obligation, PPA strengthening, and consumer protection. Open points: exact CfD designs, PPA/CfD switching rules, and the final structure of the capacity market.