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Faculty of Economics

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Newbery, D. and Pollitt, M. and Ritz, R. and Strielkowski, W.

Market design for a high-renewables European electricity system

CWPE1726

Abstract: This paper presents a set of policy recommendations for the market design of a future European electricity system characterized by a dominant share of intermittent renewable energy supply (RES), in line with the stated targets of European governments. We discuss the market failures that need to be addressed to accommodate RES in liberalized electricity markets, review the evolution of the EU's RES policy mechanisms, and summarize the key market impacts of RES to date. We then set out economic principles for market design and use these to develop our policy recommendations. Our analysis covers the value of interconnection and market integration, electricity storage, the design of RES support mechanisms, distributed generation and network tariffs, the pricing of electricity and flexibility as well as long-term contracting and risk management.

Keywords: Electricity markets, wholesale market design, renewable energy, interconnection, electricity storage, long-term contracts, capacity markets

JEL Codes: H23 L94 Q28 Q48

Author links: David Newbery  

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1726.pdf

EPRG Paper Link: 1711

Open Access Link: https://doi.org/10.17863/CAM.12941


Published Version of Paper: Market design for a high-renewables European electricity system, Newbery, D., Pollitt, M.G., Ritz, R.A. and Strielkowski, W., Renewable and Sustainable Energy Reviews (2018)

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