Businesses are queuing up to integrate new renewable and flexibility assets onto grids across the EU, while industry faces barriers to electrification. As underlined in the Action Plan for Affordable Energy, bold and swift implementation of the Electricity Market Design (EMD) framework is needed to accelerate renewable energy investment in the interests of the EU’s competitiveness and economic resilience. At the same time, the planned revision of the EMD framework in 2026 should reform grid planning governance and introduce locational pricing as a route to cost-effective planning and structurally more affordable energy.
This briefing provides EU policymakers with recommendations on how to follow up on the Affordable Energy Action Plan with a further reform of EU power market rules.
A three-level framework for policy action on EU Electricity Market Design (EMD)
We propose a three-level policy framework to balance immediate concerns with longer-term structural measures:
- Baseline: Swift and targeted implementation of the recently decided EMD reforms and outstanding technical network codes. Progress on implementation to be monitored by a new taskforce within the European Electricity Regulatory Forum.
- A zero-emissions flexibility accelerator package: To accelerate investment in and adoption of grid flexibility technologies in the short term.
- EMD reform in 2026: To address outstanding challenges and prepare for a fast-evolving energy landscape, (a) reform the governance of grid planning to better integrate strong investment interest and (b) introduce locational price signals.
The case for further reform in the energy policy landscape
The EMD framework already provides solutions to some of the most pressing constraints in connecting new renewable energy and industrial electrification investments to the grid. It is essential to fully use the EMD framework and seek to develop new initiatives that maximise its impact.
However, structural challenges remain. Given fast-moving trends in the energy landscape and the need to keep operational costs low, the EU should make the most of the next reform moment in 2026. A public debate about choices for the 2026 reform can take place during 2025.
Reform the governance of grid planning
Planning needs to better anticipate new demand and generation development, with stronger and more independent institutions. It also needs to better improve linkages with the infrastructure of other energy vectors that will increase in importance, such as hydrogen and CO2.
At member state level, it is crucial to make network planning and operation independent from network ownership. Taking this further step on electricity transmission unbundling will improve the ability to anticipate developments in the energy sector, while saving much needed time and costs in planning procedures for connection of new renewable generation and industrial demand investments.
At the EU level, options need to be explored to make planning better reflect the systemic impact of EU political goals and longer-term needs on network development.
Introduce locational price signals
Locational pricing can contribute to better use of grids to solve grid congestion and set the conditions for structural efficiency in the operations of power grids, while incentivising investment in new generation and electrification at the places where it is most needed.
Reflecting the prices of cheap renewables for local consumers brings benefits to those consumers in the short term and will be key to increasing societal support for Europe’s competitiveness and decarbonisation goals. It will also set a sustained pathway for overall electricity price reduction by stimulating investment in new generation and grid assets, while enabling more efficient grid use and operations leading to lower system costs.
