How to benefit from a common European electricity market design

Authored by Philipp Ringler, Dogan Keles, Wolf Fichtner

Date Published: 2017

DOI: 10.1016/j.enpol.2016.11.011

Sponsors: No sponsors listed

Platforms: No platforms listed

Model Documentation: Other Narrative Flow charts Mathematical description

Model Code URLs: Model code not found

Abstract

The realization of an Internal Electricity Market in Europe is currently, on the one hand, progressing, in particular thanks to the wide-spread implementation of market coupling solutions for cross-border congestion management. On the other hand, diverging national market designs pose a threat to the continuation of this process. Given the challenges to electricity market design in a multi-regional context, we analyze how different design aspects, namely cross-border congestion management and capacity mechanisms, affect welfare and generation adequacy in Europe. In doing so, we rely on an agent-based simulation model for electricity wholesale markets which we apply within several numerical, computational case studies for the region of Central Western Europe (2012-2030). Our results confirm the benefits of market coupling in terms of welfare as well as generation adequacy. Furthermore, we find indications that coordinating market designs across regions supports these targets. Therefore, we recommend that European energy policy forms a stable, transparent regulatory framework with cross-border market coupling as an integral component. In this context, energy policy targets should be clearly defined and operationalized, which also needs to consider potential conflicts between them. Finally, electricity market designs need to be coordinated among states to benefit most from a common European market.

Tags

Simulation models systems Mechanisms Integration Challenges Generation Prices Germany Adequacy European electricity markets Electricity market design Market coupling Welfare analysis Generation adequacy Agent-based modeling and simulation