Brussels is pursuing reforms to speed up the deployment of renewable energy, curb spikes in gas prices, and reduce volatility that affects both households and businesses. The approach is not a radical upheaval, as some member states call for, but rather a measured step that aligns with the goal of lower energy costs and more predictable pricing. The plan is fairly modest in scope, with support from several northern European countries and key EU members, and is designed to strengthen protection for consumers while boosting the competitiveness of European industry. The energy commissioner, Kadri Simson, urged co-legislators to treat this file as a priority.
From Brussels’ viewpoint, the current electricity market is largely efficient and well integrated. It highlights several expectations: annual potential savings in the tens of billions—estimates from the European regulatory agency ACER suggest about 34 billion euros could be saved. The core pricing model ties prices to the most expensive technology in use, a marginal pricing approach. After a January consultation, authorities concluded that this framework provides the right price signals and that alternatives would yield weaker outcomes. Yet since mid-2021, prices have reached unprecedented highs relative to earlier levels, impacting European households and prompting action. The Russian invasion of Ukraine in 2022, combined with the ongoing rise in gas prices, has kept energy bills high even as cheaper renewables contribute a growing share of demand.
As reported by El Periódico of the Prensa Ibérica group last week, reform now centers on two pillars that must be negotiated and agreed between the European Parliament and the Council: protecting consumers and supporting industry. The first pillar seeks stronger protections for households through more stable prices anchored in a mix of renewable and non-fossil energy sources. To achieve this, consumer law would enable a broader range of long-term fixed contracts while also accommodating dynamic contracts that benefit from lower prices during off-peak periods. These contracts would need clear disclosures of advantages and disadvantages. The plan also contemplates last-resort supply providers at the member-state level to ensure no consumer loses access to electricity due to supplier delays or financial hardship.
Protection of vulnerable consumers
This framework would enable customers to mix contracts, for example choosing a fixed contract for typical use and a dynamic contract for charging electric vehicles at night or running heat pumps when prices are cheaper. Clear information on the benefits and drawbacks will be required. The plan also supports safeguards for households most at risk, including measures to avoid disconnections when bills are unpaid.
Another change would ease access to retail pricing for domestic users and small and medium-sized enterprises during crisis periods. The European Commission would determine when a crisis exists and would grant more room for consumers to access and share renewable energy directly (self-consumption) without forming formal energy communities. Individuals could invest in wind or solar projects and sell surplus electricity to suppliers or neighbors. The Commission argues this structure would allow a broader group of consumers to benefit from renewables and reduce dependence on gas pricing for electricity bills.
Stability for industry
The proposed reforms would not immediately alter how prices are set in the near term but would influence how marginal producers are charged. To promote stability, the plan envisions longer, fixed-price contracts with low-carbon providers such as renewables or nuclear. Investors supporting renewable and low-carbon projects participating in public tenders would be allowed to reserve a portion of generation for sale under these contracts.
In addition, marginal renewable and non-fossil generation—encompassing wind, solar, geothermal, hydro, and nuclear—would be organized around fixed-price contracts for difference (CfD) with floor and cap mechanisms. This structure caps profits when market prices rise and redirects excess gains to lower consumer bills. The Commission argues this arrangement ensures income security for producers while protecting consumers from sudden spikes. If prices dip below a designated minimum, producers would be compensated to cover costs. This mechanism would apply to new investments and would not retroactively affect existing hydro and nuclear plants, as noted by several member states. The plan also calls for higher market liquidity in long-term contracts to lock in future prices and shield both suppliers and households from volatility over longer horizons.
New obligations are included to ease the integration of renewable energy into the grid and improve the predictability of generation. Real-time negotiations and greater transparency for system operators would help manage grid congestion. The goal is to foster open, fair competition across European wholesale energy markets. To enhance system flexibility, the twenty-seven member states will assess needs and may introduce new support regimes for demand response and storage.
Overall, the reform package aims to safeguard electricity reliability, support industry, and empower consumers. By combining stronger protections for households, accessible self-consumption, and longer, more predictable contracting, the EU seeks to reduce the burden of energy costs while maintaining steady growth in renewable capacity. The measures focus on balancing immediate price stability with long-term investment in cleaner energy sources, a path that policymakers believe can cushion the impact of shocks and keep European industry competitive in a rapidly changing energy landscape. (Source attribution: European Commission)