Electricity market design during the Energy Transition and the Energy Crisis – Issue 136

Electricity market design has become a highly debated issue in recent times, especially in Europe, where the surge in wholesale electricity spot prices can be attributed to the excessively high costs of natural gas. Many people believe that the root cause lies in the market design’s emphasis on determining a single market clearing price based on the most expensive resource needed to meet demand, often natural gas. In addition to the immediate energy crisis and short-term challenges, analysts are increasingly worried that the current market design, if continued, would drive down wholesale electricity prices to such low levels that new investments would become unprofitable, mainly due to the widespread adoption of zero-marginal-cost renewable electricity. The long-term consequences of this situation have now become a vital part of ongoing discussions in various regions, including the United Kingdom where the government has introduced the Review of Electricity Market Arrangements (REMA).

The articles presented in this issue of the Oxford Energy Forum delve into a debate surrounding the topic of electricity market design. Recognizing the pressing need to confront the dual challenges of the short-term energy crisis and the long-term imperative of decarbonization, the contributors engage in discussions to explore the various ways in which the electricity market can be reformed.

By: OIES , Rahmat Poudineh , David Robinson , Malcolm Keay

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