Making European grids more cost-effective: the Commission is moving in the right direction, but some gaps still remain

On 15 July, the European Commission is expected to publish a proposal to amend the Electricity Market Design Directive. The proposal aims to improve how Europe’s electricity system is organised, with a focus on making better use of existing grid infrastructure while encouraging more system-friendly consumption patterns.

The proposal will:

• Guarantee an optimal and cost-effective use of the electricity grid and incentivise system-friendly consumption;
• Make it easier to reduce energy taxes for specific groups, such as energy-intensive industries and vulnerable households;
• Ensure that electricity is taxed less heavily than gas, supporting the broader goal of electrification.

What we like

Overall, Energy Cities welcomes the direction of the proposal, which supports a more resilient and affordable energy system based on decentralisation and decarbonisation, where local stakeholders—including energy communities, local authorities, citizens, and SMEs—play an active role.

In our recent report with data and examples, we’ve shown that non-fossil flexibility is essential for resilience, energy security, and affordability, offering a strong alternative to grid expansion and enabling greater involvement of local actors.

These include stronger demand-side flexibility at the local level, fairer network charges for storage systems — which play a key role in addressing grid congestion —a nd improved tariff structures that could benefit energy communities and vulnerable households.

In practical terms, this could translate into faster electrification and greater integration of renewables in urban areas, alongside more equitable electricity pricing for households, local businesses, and local authorities.

What can be improved

However, we find that the proposal could be strengthened further through additional clarifications and targeted amendments to ensure the proposal fully delivers on its ambition of a fair, flexible, and future-proof electricity system.

These include:

• A safeguard on injection tariffs, along with measures to limit long-term reservation of unused grid capacity
• Specifications of conditions to use State funds to cover network costs
• Improvements to smart grid indicators to ensure they effectively achieve their intended objectives
• Higher targets for smart meter deployment in countries that are already advanced in roll-out

Read all the detailed suggestions and amendments here.