Innovative Electricity Market Designs to Support a Transition to (Near) 100% Renewable Power System

Abstract

Developing innovative electricity market designs to facilitate a sustainable transition to (near) 100% renewable power systems while meeting societal needs is a crucial and actual topic of research. This article presents preliminary key findings from the H2020 European project TradeRES, addressing this critical topic. The project uses agent-based and optimization models to effectively capture the behaviour of different market players, and to analyse the current and future power system energy mixes of selected European case studies with different physical and spatial scales from: i) local energy communities and local energy markets (LEMs); ii) national/regional - the Netherlands, Germany, and Iberia (Portugal and Spain); and iii) pan-European energy markets. The first results on LEMs indicate a substantial economic benefit for participants and enhanced revenue streams for distributed energy resources, able to i) incentivise further decentralised investments; ii) promote the growth of variable renewable energy systems (vRES) and iii) increase flexibility at the local level. The outcomes are sensitive to the tariffs’ structure, while the retail sector competitiveness was identified as a critical parameter affecting its efficiency. For the pan-European and national/regional case studies, the first set of simulations had consistent outcomes, namely, by pointing out current design of energy-only markets to be insufficient to incentivize the high levels of vRES foreseen in Europe. Different support schemes (e.g., fixed market premia, contract for differences) were tested and results suggest they may play a relevant role in effectively covering the cost of vRES in a market environment.