Reforming European electricity markets: Lessons from the energy crisis Articles uri icon

publication date

  • October 2023

volume

  • 126

International Standard Serial Number (ISSN)

  • 0140-9883

Electronic International Standard Serial Number (EISSN)

  • 1873-6181

abstract

  • The surge in gas prices due to the Ukrainian war has sparked a European energy crisis, triggering discussions about overhauling electricity markets. The European Commission (EC) proposes maintaining short-term electricity markets, fostering long-term Power Purchase Agreements (PPAs) and Contracts-for-Differences (CfDs), and permitting Member States to regulate retail prices during emergencies. This paper proposes a market design aligning with the EC's plan while introducing additional elements to address its limitations. Notably, it advocates an enhanced reliance on CfDs tailored to the attributes of the generation technologies. This approach seeks to strike a balance by exposing technologies to short-term price signals while allocating investment risks efficiently.

keywords

  • electricity; energy crisis; energy transition; market design