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Electricity Wholesale Markets: Designs Now and in a Low-carbon Future

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  • Richard Green

Abstract

This paper compares electricity wholesale markets in the United States and Europe. The Standard Market Design in the US involves an independent system operator, nodal pricing with financial transmission rights, and integrated markets for capacity and ancillary services. In Europe, there are national, or occasionally zonal, spot markets run by companies independent of the transmission operator, and of the latter’s purchases of ancillary services. As the amount of low-carbon generation increases, prices and transmission constraints are likely to become more volatile, increasing the need to adopt an efficient market design. In most respects, the US standard market design is likely to give better results than the European models.

Suggested Citation

  • Richard Green, 2008. "Electricity Wholesale Markets: Designs Now and in a Low-carbon Future," The Energy Journal, , vol. 29(2_suppl), pages 95-124, December.
    • Handle: RePEc:sae:enejou:v:29:y:2008:i:2_suppl:p:95-124
    DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI2-6
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    References listed on IDEAS

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    1. Joskow, Paul L., 2008. "Capacity payments in imperfect electricity markets: Need and design," Utilities Policy, Elsevier, vol. 16(3), pages 159-170, September.
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    Cited by:

    1. Nicolosi, S., 2010. "Wind power integration, negative prices and power system flexibility - An empirical analysis of extreme events in Germany," MPRA Paper 31834, University Library of Munich, Germany.
    2. Orvika Rosnes, 2014. "Subsidies for renewable energy in inflexible power markets," Journal of Regulatory Economics, Springer, vol. 46(3), pages 318-343, December.
    3. MacGill, Iain, 2010. "Electricity market design for facilitating the integration of wind energy: Experience and prospects with the Australian National Electricity Market," Energy Policy, Elsevier, vol. 38(7), pages 3180-3191, July.
    4. Jean Michel Glachant & Arthur Henriot, 2013. "Melting-pots and salad bowls: the current debate on electricity market design for RES integration," Cambridge Working Papers in Economics 1354, Faculty of Economics, University of Cambridge.
    5. Zhao, Xiaoli & Wang, Feng & Wang, Mei, 2012. "Large-scale utilization of wind power in China: Obstacles of conflict between market and planning," Energy Policy, Elsevier, vol. 48(C), pages 222-232.
    6. Hiroux, C. & Saguan, M., 2010. "Large-scale wind power in European electricity markets: Time for revisiting support schemes and market designs?," Energy Policy, Elsevier, vol. 38(7), pages 3135-3145, July.
    7. Green, Richard & Vasilakos, Nicholas, 2010. "Market behaviour with large amounts of intermittent generation," Energy Policy, Elsevier, vol. 38(7), pages 3211-3220, July.
    8. 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.
    9. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Interconnections and market integration in the Irish Single Electricity Market," Energy Policy, Elsevier, vol. 51(C), pages 425-434.
    10. Sharabaroff, Alexander & Boyd, Roy & Chimeli, Ariaster, 2009. "The environmental and efficiency effects of restructuring on the electric power sector in the United States: An empirical analysis," Energy Policy, Elsevier, vol. 37(11), pages 4884-4893, November.
    11. Ward, K.R. & Green, R. & Staffell, I., 2019. "Getting prices right in structural electricity market models," Energy Policy, Elsevier, vol. 129(C), pages 1190-1206.
    12. Henriot, Arthur & Glachant, Jean-Michel, 2013. "Melting-pots and salad bowls: The current debate on electricity market design for integration of intermittent RES," Utilities Policy, Elsevier, vol. 27(C), pages 57-64.
    13. Steggals, Will & Gross, Robert & Heptonstall, Philip, 2011. "Winds of change: How high wind penetrations will affect investment incentives in the GB electricity sector," Energy Policy, Elsevier, vol. 39(3), pages 1389-1396, March.
    14. Rabindra Nepal & Tooraj Jamasb, 2011. "Market Integration, Efficiency, and Interconnectors: The Irish Single Electricity Market," Working Papers EPRG 1121, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    15. Nicolosi, Marco, 2010. "Wind power integration and power system flexibility-An empirical analysis of extreme events in Germany under the new negative price regime," Energy Policy, Elsevier, vol. 38(11), pages 7257-7268, November.
    16. Jenny Riesz & Michael Milligan, 2015. "Designing electricity markets for a high penetration of variable renewables," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 4(3), pages 279-289, May.
    17. Sikorski, Janusz J. & Haughton, Joy & Kraft, Markus, 2017. "Blockchain technology in the chemical industry: Machine-to-machine electricity market," Applied Energy, Elsevier, vol. 195(C), pages 234-246.
    18. Brinker, Laura & Satchwell, Andrew J., 2020. "A comparative review of municipal energy business models in Germany, California, and Great Britain: Institutional context and forms of energy decentralization," Renewable and Sustainable Energy Reviews, Elsevier, vol. 119(C).
    19. Foley, A.M. & Ó Gallachóir, B.P. & McKeogh, E.J. & Milborrow, D. & Leahy, P.G., 2013. "Addressing the technical and market challenges to high wind power integration in Ireland," Renewable and Sustainable Energy Reviews, Elsevier, vol. 19(C), pages 692-703.
    20. Gorecki, Paul K., 2013. "Ensuring compatibility of the all-island electricity system with the target model: Fitting a square peg into a round hole?," Energy Policy, Elsevier, vol. 52(C), pages 677-688.

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    More about this item

    Keywords

    Electricity wholesale markets; US-Europe comparison; Efficiency; market design; Low-carbon generation;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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