Electricity markets in transition: adapting design for technological evolution and consumer preferences

Electricity markets are not natural, they are designed and not technology-neutral. On one hand, the design is informed by the underlying properties of the production/exchange that the market is supposed to coordinate (existing technical fundamentals), on the other hand, once formalized, a historical design can advantage technologies based on which it was designed at the detriment of new technologies that emerge later (lock-in). Currently, there is no single design which performs the function of providing efficient signals to all concerned parties, when there is a mix of technologies with different marginal costs. To date, most of proposed solutions have focused on incrementally adjusting or extending the existing energy only markets despite the fact that the experience with time-differentiated energy-only markets has shown that they cannot fulfil the design requirements by themselves.  This paper seek to provide some insights on the question that how electricity market design can be adapted for technological evolution and consumer preferences.

By: Donna Peng , Rahmat Poudineh

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