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1. Member States may apply for derogations from the relevant provisions of Articles 3 and 6, Article 7(1), Article 8(1) and (4), Articles 9, 10 and 11, Articles 14 to 17, Articles 19 to 27, Articles 35 to 47 and Article 51 provided that:

(a) the Member State can demonstrate that there are substantial problems for the operation of small isolated systems and small connected systems;

(b) outermost regions within the meaning of Article 349 TFEU cannot be interconnected with the Union's energy market for evident physical reasons. In the situation referred to in point (a) of the first subparagraph, the derogation shall be limited in time and shall subject to conditions aiming to increase competition and integration with the internal market for electricity. In the situation referred to in point (b) of the first subparagraph, the derogation shall not be limited in time. The Commission shall inform the Member States of those applications before adopting the decision, protecting the confidentiality of commercially sensitive information.

A derogation granted under this Article shall aim to ensure that it does not obstruct the transition towards renewable energy, increased flexibility, energy storage, electromobility and demand response. In its decision granting a derogation the Commission shall set out to what extent the derogation is to take into account the application of the network codes and guidelines.

2. Articles 3, 5 and 6, Article 7(1), points (c) and (g) of Article 7(2)) Articles 8 to 17, Article 18(5) and (6), Articles 19 and 20, Article 21(1), (2) and (4) to (8), point (c) of Article 22(1), points (b) and (c) of Article 22(2), the last subparagraph of Article 22 (2), Articles 23 to 27, Article 34(1), (2) and (3), Articles 35 to 47, Article 48(2) and Articles 49 and 51 shall not apply to Cyprus until its transmission system is connected to other Member States' transmission systems via interconnections.

If the transmission system of Cyprus is not connected to other Member States' transmission systems by means of interconnections by 1 January 2026, Cyprus shall assess the need for derogation from those provisions and may submit a request to prolong the derogation to the Commission. The Commission shall assess whether the application of the provisions risks causing substantial problems to the operation of the electricity system in Cyprus or whether their application in Cyprus is expected to provide benefits to the functioning of the market. On the basis of that assessment, the Commission shall issue a reasoned decision to prolong the derogation in full or in part. The decision shall be published in the Official Journal of the European Union.

2a. By way of derogation from Article 6(9), (10) and (11), Estonia, Latvia and Lithuania, may conclude financial contracts for balancing capacity up to five years before the start of the provision of the balancing capacity. The duration of such contracts shall not extend beyond eight years after Estonia, Latvia and Lithuania have joined the Continental Europe Synchronous Area.

The regulatory authorities of Estonia, Latvia and Lithuania may allow their transmission system operators to allocate cross-zonal capacity on a market-based process as set out in Article 41 of Regulation (EU) 2017/2195, without volume limitations until six months after the day on which the co-optimised allocation process is fully implemented and operational pursuant to Article 38(3) of that Regulation.

2b. By way of derogation from Article 22(4), point (b), Member States may request that generation capacity that started commercial production before 4 July 2019 and that emits more than 550 g of CO2 of fossil fuel origin per kWh of electricity and more than 350 kg CO2 of fossil fuel origin on average per year per installed kWe may, subject to compliance with Articles 107 and 108 TFEU, exceptionally be committed or receive payments or commitments for future payments after 1 July 2025 under a capacity mechanism approved by the Commission before 4 July 2019.

2c. The Commission shall assess the impact of the request referred to in paragraph 2b in terms of greenhouse gas emissions. The Commission may grant the derogation after assessing the report referred to in paragraph 2d, provided that the following conditions are fulfilled:

(a) the Member State has carried out, on or after 4 July 2019, a competitive bidding process pursuant to Article 22 and for a delivery period after 1 July 2025, which aims to maximise the participation of capacity providers which meet the requirements in Article 22(4);

(b) the amount of capacity offered in the competitive bidding process referred to in point (a) of this paragraph is not sufficient to address the adequacy concern as identified pursuant to Article 20(1) for the delivery period covered by that bidding process;

(c) the generation capacity that emits more than 550 g of CO2 of fossil fuel origin per kWh of electricity is committed or receives payments or commitments for future payments for a period not exceeding one year, and for a delivery period which does not exceed the duration of the derogation, and is procured through an additional procurement process which complies with all requirements of Article 22 except for those laid down in paragraph 4, point (b) of that Article and only for the amount of capacity that is needed to solve the adequacy concern referred to in point (b) of this paragraph.

The derogation pursuant to this paragraph may be applied until 31 December 2028, provided that the conditions set out therein are complied with for the entire duration of the derogation.

2d. The request for the derogation referred to in paragraph 2b shall be accompanied by a report of the Member State which shall include:

(a) an assessment of the impact of the derogation in terms of greenhouse gas emissions, and on the transition towards renewable energy, increased flexibility, energy storage, electromobility and demand response;

(b) a plan with milestones to transition away from the participation of generation capacity referred to in paragraph 2b in capacity mechanisms by the date of the expiry of the derogation, including a plan to procure the necessary replacement capacity in line with the indicative national trajectory for the overall share of renewable energy and an assessment of the investment barriers causing the lack of sufficient bids in the competitive bidding procedure referred to in paragraph 2c, point (a).

3. This Regulation shall not affect the application of the derogations granted under Article 66 of Directive (EU) 2019/944.

4. In relation to the attainment of the 2030 interconnection target, as stipulated under Regulation (EU) 2018/1999, the electricity link between Malta and Italy shall be duly taken into account.