Electricity Market Design and Renewable Energy Deployment
Will the evolution towards a power system with high shares of variable renewable energy sources (VRE) require a new electricity market design?
Real-world electricity market design is diverse, complex, multi-level and path-dependent, ranging from liberalised markets to integrated utilities, from very flexible power systems to very inflexible systems. Characteristics of VRE sources like solar and wind energy provide challenges to these systems and markets, once deployed at high shares. These are mostly linked to capital intensity and low short-run marginal cost, limited predictability and variability, and decentralised generation.
The RES-E-MARKETS project aims to answer the question: how to reform current market and regulatory frameworks in order to accommodate high shares of VRE in a timely, cost-effective and secure fashion? To do so, the IEA RETD TPC commissioned FTI-CL Energy and Neon Consulting to offer practical, relevant and implementable policy recommendations differentiated between jurisdictions with and without liberalised wholesale electricity markets, for a time horizon of 2050.
Four power system prototypes were selected to ensure the whole coverage of the electricity market, namely Energy-only market, Vertically integrated utility, Hybrid market and Prosumer market. The report includes (i) high-level recommendations focusing on short-term system operations, system development and investment, and governance and regulatory framework, (ii) recommendations for whole market design, and (iii) recommendations for retail market design.
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