How Renewable Energy is Reshaping Europe’s Electricity Market Design

De Vries, Laurens; Verzijlbergh, R.A.

doi:10.5547/2160-5890.7.2.ldev

How Renewable Energy is Reshaping Europe’s Electricity Market Design

Title

How Renewable Energy is Reshaping Europe’s Electricity Market Design

Author

De Vries, Laurens (TU Delft Energie and Industrie)
Verzijlbergh, R.A. (TU Delft Energie and Industrie)

Date

2018

Abstract

We present a systematic review of the challenges to the regulation of electricity markets that are posed by the integration of variable renewable energy sources. System integration is the key to developing the required flexibility, because flexibility options exist at all system levels and within the competitive as well as in the regulated (network) domains. The fluctuating nature of variable renewable energy changes the dynamics of investment decisions. We develop a framework for analysing relations between aspects of the regulation of the power sector that need to be coordinated in order to achieve (or at least improve) economic efficiency. We base the framework on the technical functionalities of the electricity infrastructure, which we group along three dimensions: system level (from retail/distribution to transmission/wholesale), geographic scope (the connection between electricity systems) and time scales (from real-time operations and balancing markets to the investment time scale). The framework helps identify regulatory challenges—potential inefficiencies due to a lack of coordination—and to place them into context. The picture that emerges from this approach is that the institutional fragmentation of the European electricity sector will become increasingly burdensome as the development variable renewable energy requires ever closer coordination between countries, between the different levels of the electricity system and between markets that serve different time scales. Interactions between elements of market design and regulation such as congestion management, renewable energy policy and system adequacy policy affect each other and are an additional reason for a system integration approach to regulation.

Subject

Electricity market design
renewable energy
flexibility
system integration
OA-Fund TU Delft

To reference this document use:

http://resolver.tudelft.nl/uuid:8705b586-f980-4458-b0db-c1336e7a7b19

DOI

https://doi.org/10.5547/2160-5890.7.2.ldev

ISSN

2160-5890

Source

Economics of Energy & Environmental Policy, 7 (2), 31-49

Part of collection

Institutional Repository