EU to revamp power market, aiming to blunt price spikes

Electrical power pylons of high-tension electricity power lines are seen in Brussels, Belgium, November 24, 2022. 

Two-way CfDs offer generators a fixed "strike price" for their electricity, regardless of the price in short-term energy markets.

Countries would also need to do more to encourage power purchase agreements (PPA) - another type of long-term contract to directly buy electricity from a generator - such as by providing state guarantees for such contracts.

Fossil fuel-powered generators would not receive this support. The aim is to direct support towards the huge investments in renewable energy EU countries need to quit Russian fossil fuels and meet climate change goals.

Other elements aim to push gas out of Europe's energy mix faster - for example, by requiring countries to expand energy storage and other alternatives to replace the role gas plants play in balancing the power grid.

Currently, power prices in Europe are set by the final generator needed to meet overall demand. Often, that is a gas plant, so gas price spikes - like those caused last year by Russia slashing gas deliveries - can send electricity prices soaring.