Which market design best suits the low-carbon transition?

Sep 27, 2016

The European electricity industry is supportive of Europe’s decarbonisation agenda, and is dedicated to decarbonising electricity production by 2050. In the midst of this transition, Europe must ensure secure, sustainable and affordable energy to its citizens and businesses. With today’s numerous market interventions distorting price formation, the electricity system lacks signals, both for short-term operations, and for longer-term system adequacy and decarbonisation. The market environment has become increasingly volatile and the risk of exposure for investors has risen. In this context, the issues faced by market participants and investors are similar for all assets, be it thermal or renewable generation, storage, or demand response. EURELECTRIC recently adopted recommendations for an electricity market design that is suitable for a cost-efficient, low-carbon transition. While the power sector faces different fundamentals and regulatory frameworks, market designs are not carved in stone, and should evolve with the transition. Customers at the centre of the new market design [Tweet "EURELECTRIC: clear roles and responsibilities for all market players must be defined"]Empowered customers will play a crucial role in addressing the challenges of the energy transition. Integrating increasing shares of variable renewable energy sources (RES) into the system, makes demand response ever more relevant. Technological solutions such as heat pumps, electric vehicles, home management systems, home energy devices, and connected objects will give them unprecedented control over their energy use. Rules enabling customers’ participation in the market, and ensuring fair competition between all resources (generation, demand response, storage) must be implemented. For this to happen, clear roles and responsibilities for all market players must be defined, including regard for balancing responsibility. Retailers should also be [...]