When the agenda remains unchanged, the European Commission will unveil the anticipated plan. The electricity market design reform in Europe, in place for more than two decades, is set to be discussed on March 14. Brussels began the debate in mid-January, and since then many countries have voiced their positions and red lines. In early January, Spain expected the European Commission to initiate a public consultation calling for deep reform. Germany, the Netherlands, Denmark, Estonia, Latvia, Finland, and Luxembourg have joined the discussion and are reporting any changes in design in a joint letter. The package will come with an impact assessment as a key element of the process.
The stance of these seven nations signals a challenging and intricate negotiation once the proposal reaches the cabinets of EU governments in mid-March. These countries had previously signed a letter in October 2021 opposing the electricity market reform. The government of Pedro Sánchez has argued that the European electricity market has shown resilience and delivered substantial benefits over the last decade, including low wholesale prices, enhanced security of supply, and the large-scale integration of renewable energy sources.
Thus, a conservative approach—favoring common sense and limited adjustments—remains the prevailing bet. “Any reform that goes beyond minor modifications to the current framework should be justified by a thorough impact assessment and not pursued under crisis conditions,” the Danish government states in a publicly released letter. The seven northern European countries acknowledge that the European electricity system faced a triple exceptional crisis last year. This stemmed from Russia’s energy war, limited nuclear power output, and low hydroelectric generation due to scarce rainfall. All of these factors contributed to tighter gas supplies, higher electricity prices, and greater price volatility that stressed households and businesses alike.
lessons from the past
The group argues Europe should learn from the previous year while keeping sight of the overarching objective: ensuring secure, affordable energy while preserving ambitious climate and energy targets in the medium to long term. “It is essential that efforts to address affordable electricity prices and security of supply do not jeopardize market integrity, the ongoing decarbonization drive, or the smooth functioning of the electricity market.”
The seven parties insist that any Brussels reform should rest on five core principles. First, it must support the continued integration of electricity markets, increase cross-border interconnections, and remove obstacles to deeper integration. They also emphasize that investments in the green transition—valued at roughly 487,000 million euros annually between 2021 and 2030—must be safeguarded and enhanced. Critics within the sector worry that new rules could undermine investor confidence in essential investments and even threaten governmental objectives. This concern is echoed by observers who stress the need for a stable regulatory environment to attract capital.
voluntary agreements
A push for more efficient short-term markets is also on the table. “Short-term markets that rely on marginal pricing offer a solid foundation for efficient price signals, ensuring appropriate electricity flow and encouraging decarbonization of the sector,” explain the seven countries backing the initiative. They advocate for long-term contracts, such as power purchase agreements and differential contracts, as they provide greater investor certainty. However, participation in these contracts should remain voluntary. The emphasis is not solely on renewable deployment but on a balanced mix that includes transitional strategies and practical integration across member states. The letter also calls for measures to strengthen consumer protections, enabling households to choose variable or fixed-rate contracts and lowering entry barriers for new entrants like energy communities, thereby facilitating local-scale generation and collective purchasing.