Driving Energy Transition through Integrated Forward Markets

The European Union’s (EU) wholesale electricity market design has been the subject of debate. In particular, questions have arisen about the current market design and the need to adapt it to the goals of the clean energy transition. The EU’s Agency for the Cooperation of Energy Regulators (ACER) focusses on long-term markets and improved hedging instruments as a way to manage systems with renewable, and by that intermittent, power generation. The growing share of wind and solar photovoltaic (PV) in power generation is resulting in a loss of flexible capacity, which underscores the need for long-term mechanisms for resource allocation in order to maintain system reliability.

This paper, while relying on the effective integration of the short-term electricity markets, makes some suggestions for an increased integration and liquidity of the EU forward markets, while ensuring the growth of renewables and the continuity of electricity supply.

By: Paulina Beato