COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Directive of the European Parliament and of the Council on common rules for the internal market in electricity (recast) Proposal for a Regulation of the European Parliament and of the Council on the electricity market (recast) Proposal for a Regulation of the European Parliament and of the Council establishing a European Union Agency for the Cooperation of Energy Regulators (recast) Proposal for a Regulation of the European Parliament and of the Council on risk preparedness in the electricity sector
Date: 2016-11-30
Institutions: Directorate-General for Energy, European Commission
Subjects: European Union Agency for the Cooperation of Energy Regulators, consumer, electrical energy, electricity supply, energy cooperation, energy grid, operation of the Institutions, renewable energy, security of supply, single market

EUROPEAN 
COMMISSION 

Brussels, 30.11.2016  
SWD(2016) 411 final 

COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Directive of the European Parliament and of the Council on common 
rules for the internal market in electricity (recast) 

Proposal for a Regulation of the European Parliament and of the Council on the 
electricity market (recast) 

Proposal for a Regulation of the European Parliament and of the Council establishing 
a European Union Agency for the Cooperation of Energy Regulators (recast) 

Proposal for a Regulation of the European Parliament and of the Council on risk 
preparedness in the electricity sector 

{COM(2016) 861 final} 
{SWD(2016) 410 final} 
{SWD(2016) 412 final} 
{SWD(2016) 413 final} 

EN 

   EN 

 
 
 
 
  
 
 
 
 
 
 
Executive Summary Sheet 

Impact assessment on: 
-  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  on common  rules  for  the  internal 

market in electricity (recast) 

-  Proposal for a Regulation of the European Parliament and of the Council on the electricity market (recast) 
-  Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  establishing  a European  Union 

Agency for the Cooperation of Energy Regulators (recast) 

-  Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  risk  preparedness  in  the 

electricity sector  

A. Need for action 

Why? What is the problem being addressed? Maximum 11 lines 
Well-functioning  energy  markets  that  ensure  secure  energy  supplies  at  competitive  prices  are  essential  for 
achieving growth and consumer welfare. They are hence at the heart of EU energy policy. They are also a key 
objective of the EU energy union, which announced its intention to prepare legislative proposals on security of 
electricity of supply and to redesign the electricity market, linking wholesale and retail. This impact assessment 
shows  that  the  low-carbon  transition  will  have  profound  implications  for  the  organisation  of  the  EU  electricity 
sector  and  the  roles  of  market  actors  and  consumers.  It  identifies  the  need  for  potential  improvements  in  four 
interrelated  areas:  (i)  the  current  market  design  is  not  fit  for  taking  up  large  amounts  of  variable,  often 
decentralised  electricity  generation  and  allowing  for  new  technological  developments;  (ii)  there  is  uncertainty 
over whether future investment in generation capacity will be sufficient and over uncoordinated capacity markets; 
(iii) when preparing or managing crisis situations, Member States follow uncoordinated national approaches and 
tend  to  disregard  the  situation  across  their  borders;  and  (iv)  in  retail  electricity  markets  there  is  a  slow 
deployment of new services, low levels of service and questionable market performance.  

What is this initiative expected to achieve? Maximum 8 lines 
The general policy objective is to make electricity markets more secure, efficient and competitive, whilst ensuring 
that electricity is generated in a sustainable way and remains affordable to all. This requires the full benefits of 
competition  in  terms  of  prices,  as  well  as  the  range  and  level  of  services,  to  be  passed  through  to  every 
consumer.  There  are  four  specific  objectives:  (i)  adapting  the  market  design  so  that  variable  and  often 
decentralised  generation  is  cost-effective,  taking  into  account  technological  developments;  (ii)  facilitating 
investment in the right amount and type  of resources to ensure security of supply, whilst limiting the distortive 
effects of uncoordinated capacity mechanisms; (iii) improving Member States’ reliance on each other in times of 
system  stress  and  strengthening  their  coordination  and  cooperation  in  crises;  and  (iv)  addressing  the  causes 
and symptoms of weak competition on energy retail markets. 

What is the value added of action at the EU level? Maximum 7 lines  
Electricity markets have become more integrated thanks to increasing cross-border electricity trading and more 
physical  interconnections  in  the  European  electricity  grid.  These  factors,  plus  progressively  higher  shares  of 
renewable  energy  sources,  have  made  the  national  electricity  systems  much  more  interdependent  than  in  the 
past.  This  initiative  aims  at  amending  existing  EU  legislation  and at  creating  new  frameworks  for  cross-border 
cooperation. These can legally and practically only be achieved at the European level. The challenges cannot be 
addressed  as  effectively  by  individual  Member  States.  Fostering  a  more  efficient  and  integrated  EU  electricity 
market,  and  ensuring  a  more  coordinated  policy  response  to  security  of  supply,  requires  harmonised  and 
coordinated approaches by all Member States. These can most effectively be achieved through EU action. 

B. Solutions 

What legislative and non-legislative policy options have been considered? Is there a preferred 
choice or not? Why? Maximum 14 lines  
The impact assessment presents a range of legislative and non-legislative policy options for each of the four 
problem areas identified. 
For adapting the market design: (0) no EU action; (0+) a non-regulatory option; (1) upgrade the flexibility of the 
market by introducing a legally binding framework, leaving scope for national implementation. This option sets 
out varying degrees of ambition for integrating markets, from least ambitious (a) to most ambitious (c); (2) full 
integration of the EU market. The preferred option is 1(c). 
For facilitating investments in generation capacity: (0) no EU action; (0+) a non-regulatory option; (1) pursue 
an improved energy market, without capacity mechanisms; (2) base capacity mechanisms on an EU-wide 
adequacy assessment; (3) base capacity mechanisms with an EU framework for cross-border participation; (4) 
set out EU/regional capacity mechanisms. The preferred option is 3 (which comprises also Options 1 and 2). 
For improving Member States’ reliance and cooperation in times of crisis: (0) no EU action; (0+) 
enforcement non-regulatory option; (1) common minimum rules to be respected by Member States; (2) common 
minimum rules plus obligations to cooperate effectively in a regional and EU context; (3) full harmonisation and 
decision-making at regional level. The preferred option is 2. 
For addressing weak competition in retail markets: (0) no EU action; (0+) a non-regulatory option to improve 
competition and consumer engagement; (1) introduce a legally binding framework leaving scope for national 
implementation; (2) full harmonisation and extensive safeguards for consumers. The preferred option is 1. 

 
 
 
                                                                                                  
 
The preferred options are the most effective, the most economically efficient and the most consistent with other 
policy areas. 

Who supports which option? Maximum 7 lines  
The various options and ideas are based on a weighing of the options and arguments put forward by all relevant 
stakeholders, in particular during the public consultations. We believe the initiatives proposed are fair and 
proportionate compromises. We believe they will result in markets that in the short and medium term are more 
secure, efficient and competitive, whilst ensuring that electricity is generated in a sustainable way and remains 
affordable. The proposed initiatives ensure that no harm is done to the internal electricity market.  

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)? Maximum 12 lines             
Below we provide a holistic overview of the benefits of the preferred options: 
-  A  contribution  to  the  internal  electricity  market  by  establishing  a  level  playing  field  among  different 
resources  on  the  supply/demand  side.  This  increases  competitive  pressures  and  could  therefore  put 
downward pressure on electricity bills, ultimately benefitting consumers and the economy with no impact on 
the environment. Moreover, a well-functioning electricity market will have indirect environmental benefits as it 
would create incentives to increase low-carbon generation. 

-  More  reliable  electricity  systems  in  Europe  at  lower  cost.  These  benefit  the  economy  and  provide  direct 
benefits  to  businesses  and  consumers.  They  would  help  prevent  electricity  crises  and,  should  they 
nevertheless occur, would optimise scarce resources and ensure that markets continue functioning as long as 
possible. 

-  More efficient operation of European transmission and distribution systems. This leads to cost savings that 
can ultimately  be  passed through  to consumers,  including  the  energy  poor and  businesses.  This  is  again  a 
benefit to the economy and citizens. It also has indirect environmental benefits since a more efficient system 
is better able to accommodate high shares of renewable power generation. 

-  The measures proposed on energy poverty will have positive effects on the health and well-being of EU 

households, as well as indirectly providing economy-wide productivity gains. 

What are the costs of the preferred option (if any, otherwise main ones)? Maximum 12 lines                 
There may be administrative costs for stakeholders deriving from the need to review and adapt their business 
practices to facilitate the changes in the functioning of the electricity markets proposed in the initiative. However, 
there will also be cost savings as the electricity markets will become more integrated. No significant direct 
negative social or environmental impacts are expected.  

What are the impacts on SMEs and competitiveness? Maximum 8 lines 
The proposed initiatives will reduce market barriers for new entrants and provide them with a stable operating 
framework. This is particularly important for start-ups and SMEs who typically offer innovative energy services 
and products. On the other hand, very small installations may be subject to administrative impacts. These 
impacts are significantly reduced by the measures facilitating their aggregation, allowing the joint operation and 
management of a large number of small plants. Certain exemptions are equally foreseen. 

Will there be significant impacts on national budgets and administrations? Maximum 4 lines 
The proposed initiatives may impose a one-off cost for Member States, who will be required to amend their 
national legislation. They may also put an additional burden on competent authorities as they will be required to 
oversee the implementation of these initiatives and monitor their continuous application. However, the impact will 
be limited since competent authorities already perform such duties at national level. 

Will there be other significant impacts? Max 6 lines  
Closer cooperation with the Energy Community Contracting Parties can be foreseen once these countries 
implement and apply the proposed initiatives. This holds especially for Member States that share borders with 
Energy Community countries. 

Proportionality? 

The preferred options summarised above have in common that they seek to achieve a balance between four 
aims: i) improving the overall competitiveness, efficiency and reliability of electricity markets; (ii) enabling the 
transition towards low-carbon electricity production; (iii) promoting regional cooperation; and (iv) leaving scope 
for national implementation. 

D. Follow up 

When will the policy be reviewed? Maximum 4 lines  
The Commission will monitor the transposition of the legislation and compliance with the measures adopted. It 
will take enforcement measures if and when required. The Agency for the Cooperation of Energy Regulators 
(ACER) will annually monitor progress towards achieving the objectives of the proposed initiatives. The 
Commission will evaluate the effectiveness, efficiency, coherence and relevance of the measures finally adopted 
5 years (indicative) after the entry into force of the adopted measures.