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Evolving Bidding Formats and Pricing Schemes in USA and Europe Day-Ahead Electricity Markets

Author

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  • Ignacio Herrero

    (Citadel LLC, 120 London Wall, London EC2Y 5ET, UK)

  • Pablo Rodilla

    (Institute for Research in Technology, Comillas Pontifical University, Sta. Cruz de Marcenado 26, 28015 Madrid, Spain)

  • Carlos Batlle

    (MIT Energy Initiative, 77 Mass. Av., Cambridge, MA 02139, USA
    Florence School of Regulation, European University Institute, Via Boccaccio 121, I-50133 Florence, Italy)

Abstract

This paper compares the evolution of USA and European power markets and evaluates the suitability and future challenges of their designs in the context of the transition to a low-carbon power system. The analysis focuses on bidding formats (the way in which organized electricity markets allow participants to express their operational constraints) and pricing schemes (how agents recover their short-term costs from market prices). The radical evolution of the power mixes worldwide already experienced in the last decade and the larger one to come, with even greater shares of renewable energy and a more prominent role for storage resources, exposes limitations in current market designs. We develop an in-depth and comprehensive review of best practices from both sides of the Atlantic, and learning from them, we draw recommendations to evolve these market design elements.

Suggested Citation

  • Ignacio Herrero & Pablo Rodilla & Carlos Batlle, 2020. "Evolving Bidding Formats and Pricing Schemes in USA and Europe Day-Ahead Electricity Markets," Energies, MDPI, vol. 13(19), pages 1-21, September.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:19:p:5020-:d:418552
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    References listed on IDEAS

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    Cited by:

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    2. Mete Şeref Ahunbay & Martin Bichler & Johannes Knörr, 2023. "Challenges in Designing Electricity Spot Markets," NBER Chapters, in: New Directions in Market Design, National Bureau of Economic Research, Inc.
    3. Eicke, Anselm & Schittekatte, Tim, 2022. "Fighting the wrong battle? A critical assessment of arguments against nodal electricity prices in the European debate," Energy Policy, Elsevier, vol. 170(C).
    4. Bjørndal, Endre & Bjørndal, Mette Helene & Coniglio, Stefano & Körner, Marc-Fabian & Leinauer, Christina & Weibelzahl, Martin, 2023. "Energy storage operation and electricity market design: On the market power of monopolistic storage operators," European Journal of Operational Research, Elsevier, vol. 307(2), pages 887-909.
    5. Shilpa Bindu & José Pablo Chaves Ávila & Luis Olmos, 2023. "Factors Affecting Market Participant Decision Making in the Spanish Intraday Electricity Market: Auctions vs. Continuous Trading," Energies, MDPI, vol. 16(13), pages 1-23, July.
    6. Ehrhart, Karl-Martin & Ott, Marion & Seifert, Stefan & Wang, Runxi, 2024. "Combinatorial auctions for renewable energy — potentials and challenges," Energy Policy, Elsevier, vol. 186(C).
    7. Martin Bichler & Hans Ulrich Buhl & Johannes Knörr & Felipe Maldonado & Paul Schott & Stefan Waldherr & Martin Weibelzahl, 2022. "Electricity Markets in a Time of Change: A Call to Arms for Business Research," Schmalenbach Journal of Business Research, Springer, vol. 74(1), pages 77-102, March.
    8. Guodong Liu & Zhi Li & Yaosuo Xue & Kevin Tomsovic, 2022. "Microgrid Assisted Design for Remote Areas," Energies, MDPI, vol. 15(10), pages 1-23, May.
    9. Brown, David P. & Eckert, Andrew & Silveira, Douglas, 2023. "Screening for collusion in wholesale electricity markets: A literature review," Utilities Policy, Elsevier, vol. 85(C).

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