Internal Energy Market

Electricity

Natural Gas

In 1996 the first directives in the energy sector were introduced with the aim of harmonizing and liberalizing the European Union (EU) internal energy market and creating a more competitive, consumer-centred and non-discriminatory EU energy market with market-based supply prices. These directives address market access, transparency and regulation, consumer protection, support for interconnection and adequate levels of supply. Consequently, the main objectives of the EU internal energy market are to strengthen and expand the rights of individual consumers and energy communities, address energy poverty, clarify the roles and responsibilities of market participants and regulators, and to address security of the supply of electricity, gas and oil, as well as the development of trans-European networks for gas and electricity.

During the 1990s, when most national electricity and natural gas markets were still monopolies, the EU and the member states decided to gradually open these markets to competition. The first liberalization directives (First Energy Package) were adopted in 1996 (electricity) and 1998 (gas), to be transposed into the Member States' legal systems by 1998 (electricity) and 2000 (gas).

The Second Energy Package was adopted in 2003, with its directives to be transposed into national law by Member States by 2004, with some provisions entering into force only in 2007. Industrial and domestic consumers were free to choose their gas and electricity suppliers from a wider range of competitors.

In April 2009, the Third Energy Package to further liberalize the internal electricity and gas market was adopted, amending the Second Package and providing the basis for the implementation of the internal energy market.

In June 2019, the Fourth Energy Package, entitled "Clean Energy for All Europeans", was adopted. It is composed of a directive (EU Electricity Directive 2019/944/EU) and three regulations: the Electricity Regulation (2019/943/EU), the Risk Preparedness Regulation (2019/941/EU) and the Agency for Cooperation of Energy Regulators (ACER) Regulation (2019/942/EU). This package introduces new electricity market rules to meet consumers' needs for secure, sustainable, competitive and affordable energy, and to attract investment. It covers energy efficiency, renewable energy, electricity market design, security of electricity supply, and governance rules for the EU. It provides incentives to consumers and introduces a new threshold for electricity power plants to be eligible to receive subsidies as capacity mechanisms.

The Directive on common rules for the Internal Market in Electricity (Directive (EU) 2019/944) focuses on Member States and consumers by defining a set of common rules for generation, transmission, distribution, energy storage and trading of electricity, as well as consumer protection rules in order to create truly integrated, competitive, consumer- centred, flexible, fair and transparent electricity markets in the Union. It lays down the main rules relating to the organisation and functioning of the electricity sector in the EU, notably the applicable rules on unbundling, consumer protection and open access to the integrated market, as well as third party access to transmission and distribution infrastructure, unbundling requirements and rules on the independence of the regulatory authorities in Member States. The Directive also sets out ways in which Member States, regulatory authorities and transmission system operators can cooperate towards the creation of a fully interconnected internal market for electricity that enhances the integration of electricity from renewable sources, free competition and security of supply.

The Internal Electricity Market Regulation (Regulation (EU) 2019/943) revised the rules and principles of the internal electricity market to ensure its proper functioning and competitiveness. It supports the decarbonisation of the EU energy sector, removes barriers to cross-border trade in electricity and enables the EU's transition to clean energy by delivering on its commitments under the Paris Agreement. The Regulation defines a set of market principles regarding the functioning of electricity markets: prices will be formed on the basis of demand and supply; customers will benefit from market rules and be active market participants; incentives for decarbonised electricity generation will be market-based; barriers to cross-border flows of electricity will be progressively removed; generators will be directly or indirectly responsible for their electricity sales; new conditions will be set under which Member States will be able to set up capacity mechanisms and establish principles for their creation.

The Risk Preparedness Regulation (Regulation (EU) 2019/941) strengthens risk preparedness by encouraging cooperation between EU and neighbouring countries' transmission system operators and the Agency for the Cooperation of Energy Regulators (ACER). It also aims to promote the cross-border management of electricity networks in the event of an electricity crisis through the new regional operational centres. In addition, it obliges Member States to prepare contingency plans for potential electricity crises.

The Regulation (2019/942/EU) aims to reform ACER, with the aim of recasting legal acts and strengthening its powers regarding cross-border regulatory cooperation where there is a risk of national and regional fragmentation

The Fifth Energy Package, entitled "Delivering on the European Green Deal", was published on July 14, 2021 with the aim of aligning the EU's energy goals with Europe's new climate ambitions for 2030 and 2050. The package sets out a roadmap for making the EU economy sustainable, turning climate and environmental challenges into opportunities across all policy areas, driving resource efficiency, moving towards a clean and circular economy, and making the transition fair and inclusive for all. The debate on energy aspects is still ongoing. The main overall objectives are as follows:

Making the EU climate-neutral by 2050

Achieve a reduction of greenhouse gas emissions by at least 55%

Address Energy Poverty

Reduce External Energy Dependency and Promote Energy Diversification

Making Transport Sustainable for All

  Renovate Buildings for Energy Efficiency and Savings

Create jobs and Growth