On 16 March 2019 the European Parliament adopted the new Electricity Directive, which was finally approved by the Council on 22 May 2019. The Directive, like seven other legislative initiatives, is part of the "Clean Energy for All Europeans" Winter Package that was published by the European Commission on 30 November 2016 (see Eubelius Spotlights March 2019). Supporting the Member States in their transition to renewable energy, the new Directive aims to enable the EU to achieve its intended climate objectives by 2030 as well as the commitments made in the 2015 Paris Agreement.

Objectives

With the new Electricity Directive, the European legislator aims to prepare the European energy market for the future. The EU's point of departure is no longer a centralised energy system, but a digitised and sustainable energy system. The European legislator has opted for a decisively market-based approach in the transition to renewable energy and has focused on the integration of renewable energy into the market mechanism and vice versa.

The Directive puts the energy consumer at the centre. All consumers should have the opportunity to participate directly in the energy market by adopting their energy consumption in response to market conditions. As a result, consumers will be able to benefit from lower electricity prices or other incentives. Moreover, in order to be able to take advantage of new developments in the energy market, consumers will have access to smart energy systems and electricity supply agreements with dynamic prices which are linked to the spot market.

Change in pricing policy: emphasis on market mechanisms

In order to attract (additional) investments in the electricity market, an attempt has been made to improve market signals. To do so, an attempt has been made to improve price signals – on the one hand by removing price ceilings and, on the other hand, by virtue of the fact that price signals could become decisive for the geographical location of new investments.

In addition, the European legislator wishes to improve the competitiveness of the electricity retail market by moving away from a policy of all-embracing price regulation. The individual Member States will be responsible for ensuring that household customers and, if the Member State so wishes, small enterprises, have access to electricity of a certain quality at clearly comparable, transparent and competitive prices.

Consumer protection and information is a priority

The new Electricity Directive starts from the premise that the consumer should operate in the energy market as an active market participant. In order to facilitate this, there needs to be a large degree of freedom of choice as well as a reliable framework for consumer protection.

Consumers are encouraged to participate actively in the energy market by being given the opportunity to consume, store and sell electricity which they themselves produce.

Active participation of the consumer also requires the consumer to be sufficiently well informed. Therefore, consumers must have access to clear and comprehensible information about their rights in relation to the energy sector. The consumer can find details of these rights, as well as practical information about them, in a checklist published by the European Commission.

Finally, the new Electricity Directive introduces a framework for the regulation of "citizens' energy communities". Citizens' energy communities are a type of cooperation that can adopt any suitable legal form. They can fulfil different roles in the energy market, such as end consumer, producer, supplier, distribution system operator, handling energy storage or supplying charging services for electric vehicles.

Participation in and exiting from a citizens' energy community is straightforward and voluntary. Membership is open to different persons and entities: natural persons, local authorities or small companies.

Conclusion

The new Electricity Directive has brought the EU to a milestone in the transition to renewable energy. Along with seven other legislative instruments of the Winter Package, the Directive is designed to prepare the European energy market for the future.

We will have to wait and see which concrete measures the Member States will take in order to transpose the new Electricity Directive into national legislation. In Belgium, we particularly look forward to seeing how the federal and regional legislators will streamline the transposition of the new Electricity Directive in their respective regulations.