The four principal groups in the European Parliament—the Progressive Alliance of Socialists and Democrats, the European People’s Party, Renew Europe, and the European Green Party—reached a consensus on Wednesday regarding changes to reform the electricity market. The agreement softens the original proposal put forward by MEP Nicholas González Casares and his team. The text goes beyond simply mandating substitutions; it includes revenue limits for energy companies during crises. One measure that drew particular criticism from energy companies was a ban on disconnecting vulnerable consumers.
The deal states that the European Commission must deliver a report before June 2024, accompanied by a bill that includes temporary relief valve measures in case prices surge. The Commission had suggested a compulsory, rather than optional, framework for crisis response. Parliament’s initial proposal included an average wholesale price that would double the five-year average and was expected to hold for three months. The current agreement retains the two conditions proposed by the Commission but removes a third condition that could have had a negative impact on the economy.
Under the pact, if a crisis is declared, wholesale prices would rise to two and a half times the previous five-year average and remain at that level for six months. The minimum price is set at 180 euros per megawatt-hour (MWh), and retail prices would increase by around 60 percent (the Commission had proposed 70 percent) compared with the previous two years, with the expectation that this level would hold for three months (six months in the Commission proposal).
Thus, Thursday’s agreement appears looser than the Commission’s initial stance. The text still awaits a vote on July 19 in the European Parliament’s Energy and Industry Committee, but it does not need to be identical. At the same time, the twenty-seven member states will strive to forge their own text as soon as possible, aiming for a trilogue—a tripartite negotiation between Parliament, the Council, and the Commission—to reach a compromise before year’s end. Spain, holding the rotating EU presidency, is responsible for guiding the discussions.
capacity markets
The most significant shift concerns capacity mechanisms—payments for a technology’s capacity rather than its actual production—and the Commission’s evaluation of introducing them as a structural element of electricity market design. This aligns with Spain’s call to normalize such markets, recognizing storage technologies like batteries, pumped storage, and especially combined-cycle plants. Initiating capacity markets, however, remains challenging unless an emergency is in effect.
One notable innovation is an integrated European auction system for renewable energy that would complement member states’ efforts to reach 45 percent renewables by 2030. The pledge is not merely aspirational; it signals a move toward accelerated deployment and smoother integration of renewables into the grid. Regulators are expected to encourage their use, with investments aimed at speeding up network development to support fast deployment of renewable generation and smart electricity demand, including electric vehicles and heat pumps. The framework should allow flexible connections and make better use of existing grid capacity, reducing the need for long waits for connection points like electric vehicle chargers.
No change to CFDs
Regarding CFDs and PPAs, the two instruments remain distinct from the Commission’s proposal. Revenue should nonetheless be directed with priority to vulnerable consumers and to fund energy transition costs, as well as electro-intensive industry during crises. For consumers, in addition to prohibiting power cuts for vulnerable groups, there would be thresholds enabling a procedure for power reduction and authorization for winter and summer precautions by Member States. This framework would empower local customers to manage consumption and shield against high bills when periods of stress hit the market.
Experts note that the evolving approach seeks a balance between protecting vulnerable households, maintaining energy security, and incentivizing investment in cleaner, resilient grids. As discussions continue in Brussels, observers emphasize that alignment among Parliament, Council, and the Commission will be crucial to delivering a stable, long-term pathway for Europe’s electricity systems. These negotiations reflect a broader push to modernize energy governance while safeguarding affordability and reliability for consumers across the EU. (Source: European Parliament briefings and committee discussions with attribution to official summaries and press materials.)