Fact Sheets on the European Union
European Parliament
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Internal energy market

The European energy market is competitive, customer-centred, flexible and non-discriminatory. Its measures address issues of market access, transparency and regulation, consumer protection, interconnections and security of supply. They strengthen the rights of individual customers, energy communities and vulnerable consumers, clarify the roles and responsibilities of market participants and regulators, and promote the development of trans-European energy networks.

Legal basis

Articles 114 and 194 of the Treaty on the Functioning of the European Union.

Objectives

In the energy sector, completing the EU’s internal market requires several steps: removing numerous obstacles and trade barriers, aligning tax and pricing policies with norms and standards, and implementing environmental and safety regulations. The objective is to ensure a functioning market with fair access, high consumer protection and sufficient levels of interconnection and generation capacity.

Achievements

A. Liberalisation of gas and electricity markets

During the 1990s, the European Union and its Member States began a gradual process of opening up their monopolistic national electricity and gas markets to competition. This initiative unfolded through several legislative packages:

  • The First Energy Package, adopted between 1996 and 1998, introduced a first liberalisation of national energy markets;
  • The Second Energy Package, adopted in 2003, allowed industrial and domestic consumers to choose their own energy suppliers from a wider range of competitors;
  • The Third Energy Package, adopted in 2009, introduced rules on the separation of energy supply and generation from transmission networks (unbundling), new requirements for independent regulators, a European agency for the cooperation of national energy regulators (ACER), European networks for transmission system operators for electricity (ENTSO-E) and gas (ENTSOG) and enhanced consumers’ rights in retail markets;
  • The Fourth Energy Package, known as ‘Clean Energy for all Europeans’ and adopted in 2019, introduced new rules for renewable energy, consumer incentives and limits on subsidies to power plants, such as capacity mechanisms. It required the preparation of risk-mitigation plans for electricity crises and increased ACER’s competences for cross-border cooperation;
  • The Fifth Energy Package, known as ‘Fit For 55’ and adopted in 2024, aligns the Union’s energy targets with its new net-zero climate ambitions and extends the gas package to hydrogen. After the Russian invasion of Ukraine in 2022, the REPowerEU plan amended it to phase out Russian fossil energy imports, diversify energy sources, introduce energy-saving measures, and accelerate the shift to renewables. The reform of the electricity market design introduced new rules for long-term contracts and increased protection of vulnerable consumers.

The following EU acts design the structure of the Union’s internal energy markets:

B. Further steps

In 2022, the Council introduced several temporary emergency measures in the EU energy market:

The integration of some of these temporary measures in the EU laws is under discussion.

In 2023, the Council extended the three gas-related regulations and the permitting regulation until respectively 2024 and 2025. In the same year, the Commission recommended against the extension of the measures in Regulation (EU) 2022/1854.

Between August 2022 and December 2023, EU countries collectively reduced gas demand by over 100 billion cubic metres, compared to their five-year average.

C. Energy market regulation: the EU Agency for the Cooperation of Energy Regulators

The EU Agency for the Cooperation of Energy Regulators (ACER) was created in 2009 and has been operational since March 2011. ACER is responsible for promoting cooperation between national energy regulatory authorities at regional and European level, especially in cross-border areas. Additionally, it monitors the development of the network and the internal electricity and gas markets. The agency has authority to investigate cases of market abuse and to coordinate the application of appropriate penalties with EU countries. ACER also drafts network codes, submits final proposals to the Commission and has responsibilities in the electricity market bidding zone review process.

The European Union created cooperation structures for European Network Transmission Systems Operators (ENTSOs) for electricity (ENTSO-E), gas (ENTSOG) and recently for Hydrogen Network Operators (ENNOH). Together with ACER, ENTSOs create detailed network access rules and technical codes. They ensure the coordination of grid operation through the exchange of operational information and the development of common safety and emergency standards and procedures. ENTSOs are also responsible for drafting a 10-year network investment plan every two years, which is reviewed by ACER.

D. Security of energy supply

Energy security in the Union relies on several measures across oil, gas and electricity sectors.

These include coordination measures, risk-preparedness in the electricity sector (Regulation (EU) 2019/941), voluntary joint gas purchases (Regulation (EU) 2022/2576), minimum gas storage levels at 90% of capacity (Regulation (EU) 2017/1938) and an EU electricity interconnection target of at least 15% by 2030 (Regulation (EU) 2018/1999).

Directive 2009/119/EC mandates EU countries to maintain minimum oil stocks equivalent to 90 days of average daily net imports or 61 days of average daily inland consumption, whichever is greater. Strategies such as diversification of sources and supply routes are also employed. Special provisions exists to address accidents in offshore oil and gas installations (Directive 2013/30/EU).

E. Trans-European Networks for Energy (TEN-E)

TEN-E is a policy focused on linking the energy infrastructures of EU countries (see fact sheet 3.5.1 on Trans-European Networks). As part of the policy, 11 priority corridors have been identified: three for electricity, five for offshore grids and three for hydrogen. Additionally, there are three priority thematic areas: smart electricity grid deployment, smart gas grids and a cross-border carbon dioxide network.

The TEN-E Regulation (EU) 2022/869 lays down guidelines for trans-European energy networks, identifying projects of common interest (PCIs) among EU countries, projects of mutual interest (PMIs) between the EU and non-EU countries, and priority projects involving trans-European energy networks. This regulation ended support for new natural gas and oil projects and required mandatory sustainability criteria for all projects.

New PCIs for energy and cross-border renewable energy projects are funded by the Connecting Europe Facility 2021-2027 for Energy (CEF-E), a funding instrument with a seven-year budget of EUR 5.84 billion allocated in the form of grants managed by the Climate, Infrastructure and Environment Executive Agency. The Commission draws up the list of PCIs via a delegated act, which enters into force only if Parliament or the Council express no objection within two months following notification.

Role of the European Parliament

In adopting all legislative packages on energy markets, Parliament has always strongly supported transmission ownership unbundling in the electricity, gas and hydrogen sectors as the most effective tool to promote investment in infrastructure in a non-discriminatory way, fair access to the grid for new entrants, and transparency in the market.

Parliament has also stressed the importance of a common European view of mid-term investments; greater cooperation between regulatory authorities, EU countries and transmission system operators, and a strong process of harmonisation of network access conditions.

On the initiative of Parliament, special importance was placed on increasing consumer rights in areas such as protecting vulnerable customers, energy poverty, protection from disconnections and suppliers of last resort.

Parliament has always strongly supported the enhancement of ACER’s competences, stressing that it had to be granted the necessary powers to overcome the issues that cannot be solved by national regulators and which hamper the integration and proper functioning of the internal market.

Parliament has adopted several resolutions on energy markets:

  • On 14 September 2023, Parliament confirmed the start of negotiations on the electricity market design. In its draft resolution, it wanted to strengthen consumer protection against volatile prices, guarantee the right to choose between fixed and dynamic price contracts, and prohibit the adoption of unilateral changes to the terms of contracts.
  • On 5 October 2022, Parliament adopted a resolution welcoming, in principle, the establishment of a temporary emergency cap on market revenues obtained from the generation and sale of electricity from renewables, nuclear and lignite and to put in place a temporary solidarity contribution mechanism from the fossil-fuel sector. It urged EU countries to ensure access to affordable and clean heating and electricity and underlined the need to avoid home evictions for vulnerable households that are unable to pay their bills and rental costs.
  • On 19 May 2022, Parliament adopted a resolution calling on the Commission to submit proposals addressing the problem of excessive electricity prices and to assess the impact of gas prices on the functioning of the electricity market.
  • On 7 April 2022, Parliament adopted a resolution calling for an immediate and full embargo on Russian imports of oil, coal, nuclear fuel and gas, and for a plan to continue ensuring the EU’s security of energy supply in the short-term.
  • On 1 March 2022, Parliament condemned Russia’s illegal, unprovoked and unjustified military aggression against Ukraine, and called for restrictions on imports of Russian oil and gas.

For more information on this topic please see the website of the Committee on Industry, Research and Energy (ITRE).

 

Matteo Ciucci