• Current levels and trends of hydrogen demand mean the EU is likely to miss its 2030 strategic goal of 20 Mt renewable hydrogen consumption:
  • Current hydrogen consumption at EU level is 7.2 Mt (99.7% of it produced from fossil fuels).
  • EU renewable energy and decarbonisation targets can increase demand for renewable and low-carbon hydrogen by 2030, but so far uptake has been slow.

• Slow electrolysers rollout means the EU is likely to miss its renewable hydrogen production target:
  • Total installed capacity of electrolysers in Europe in 2023 was 216 MW.
  • Another 1.8 GW of projects expected to become operational by end-2026.
  • Around 70 GW of projects announced to be operational by 2030, but few are advanced.
  • Overall planned electrolyser capacity is significantly less than the 100+ GW needed to reach EU’s 10 Mt renewable hydrogen production target by 2030.

• High costs prevent renewable hydrogen uptake:
  • Renewable hydrogen produced via electrolysis is 3 to 4 times more expensive than hydrogen produced from natural gas, discouraging early offtake.
  • Significant electrolysers scale-up and renewable electricity cost reductions are necessary to reduce renewable hydrogen production costs.

• Significant infrastructure plans face uncertainties in implementation:
  • 42,000 km of hydrogen pipelines, numerous storage projects and terminals are planned for the next decade, but only 1% has reached final investment decision, as future hydrogen demand uncertainties pose significant challenges to project promoters.
  • Integrated planning by (gas, electricity and hydrogen) network operators is needed to ensure grid development at sufficient pace and to optimally locate electrolysers.

• Supporting initiatives to close investment gaps:
  • A lot of EU-wide and national support schemes are set to bridge the investment gap, but it can be challenging for project investors to navigate them.
  • European Hydrogen Bank’s (EHB) November 2023 auctions resulted in low premiums, revealing cases of low renewable hydrogen production costs and some off-takers’ willingness to pay within the cost range.
  • Cost uncertainties still pose risks for early investors, highlighting the need for clearer cost information to increase demand for hydrogen.

Further integrating EU electricity markets is essential for efficiently matching supply and demand as renewable energy, which is weather-dependent, grows in the generation mix. Effective EU electricity market integration allows low-priced surplus renewable energy from one area to be shared with neighbouring regions.

A well-integrated EU power market:

• reduces price volatility;
• increases investor confidence; and
• promotes competitive electricity prices, supporting the EU's energy transition and economic competitiveness.

What is in this ACER report?

• The report evaluates progress in EU electricity market integration across all market time periods (forward, day-ahead, intraday).
• It analyses the challenges in integrating balancing markets, developing forward markets, and the slow progress in implementing methodologies for day-ahead and intraday market operations.
• It includes ACER's recommendations and ongoing efforts to improve electricity market efficiency, infrastructure investment and use, and flexibility through demand response.

Check out ACER’s new interactive electricity dashboards

For the first time, this annual monitoring report is accompanied by three dashboards on key market indicators such as prices and churn rates (a liquidity metric), balancing data (e.g., volumes, prices and exchanges) and data on long-term transmission rights (including risk premia).

What are ACER’s key findings?

In March 2024, ACER reported frequent negative electricity prices across the EU. In June 2024, the Agency warned (in its electricity cross-zonal report) of rising congestion management costs in the EU power grid, which reached €4 billion in 2023. ACER emphasised the importance of increasing cross-zonal capacity for trade.

This ACER electricity market integration report reveals that:

• With the expansion of renewable energy, the role of fossil fuels in electricity systems is diminishing. The new generation mix is marked by a 10% rise in hours of mostly non-responsive generation (generation that does not adapt to short-term changes in demand) in 2023. ACER stresses the need to enhance power system flexibility for an efficient energy transition.
• However, delays in implementing market design changes hinder flexibility. 27% of market design rules (methodologies, terms, and conditions) are delayed in terms of implementation.
• PICASSO, MARI and TERRE are the Transmission System Operators’ (TSOs’) projects establishing the three European electricity balancing platforms. Balancing market integration remained limited in 2023. The TSOs of only four Member States were active on the balancing platforms in 2023. By early November 2024, two additional TSOs had joined PICASSO and three had joined MARI. ACER encourages more TSOs to join the balancing energy platforms, highlighting that increased participation can expand cross-zonal exchanges and reduce the occurrences of high electricity balancing prices.
• Currently, electricity forward markets offer investors visibility on future prices for up to one year only, limiting long-term investment certainty. In 2023, ACER proposed improvements to long-term transmission rights (LTTRs) to strengthen forward markets and support the energy transition.

What does ACER recommend?

ACER recommends taking a proactive approach to further integrate power markets and strengthen connections.