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Electricity market design under increasing renewable energy penetration: Misalignments observed in the European Union

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  • Peng, Donna
  • Poudineh, Rahmatallah

Abstract

The ongoing debate on European Union (EU) electricity market design has focused on whether the existing wholesale market design is fit-for-purpose. However, more elements of market design, beyond the wholesale price signal, should be examined. We demonstrate that misalignments occur between the integration of renewables and a wide range of existing market coordination modules, including the wholesale market, the retail market, and network regulation. Given the multi-level governance of the EU power sector, misalignments also exist between member states' renewable support schemes and EU-level coordination modules, namely market coupling and EU Emissions Trading System (ETS). Ignoring such systemic frictions makes reform proposals ineffective and leads to forward misalignments.

Suggested Citation

  • Peng, Donna & Poudineh, Rahmatallah, 2019. "Electricity market design under increasing renewable energy penetration: Misalignments observed in the European Union," Utilities Policy, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:juipol:v:61:y:2019:i:c:s0957178719303236
    DOI: 10.1016/j.jup.2019.100970
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