Electricity Market design to ensure Security of Supply
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How can enhanced electricity market design contribute to security of energy supply in Europe?
This report was originally published by Eurelectric here. The views expressed in this report are the sole responsibility of the authors and cannot be attributed to Compass Lexecon or any other parties.
Compass Lexecon energy market experts, Fabien Roques, Charles Verhaeghe, Augustin Lorne and Clémence Rainaut contributed to a study published by Eurelectic, in which they analyse how sound electricity market design can contribute to enhancing security of supply in light of exogenous and endogenous factors that drive changes to the energy system. They assess the changing power system needs and possible approaches to enhance the investment framework to maintain this new security of supply.
Context
The high energy prices and the series of shocks that affected Europe’s energy markets, including the war in Ukraine, have revived the policy debate on the electricity market design that would ensure security of supply, and the decarbonisation of the European economy. In this context, Eurelectric launched a study to assess potential evolutions of the current electricity market design and broader regulatory framework.
Our Role
Compass Lexecon experts supported Eurelectric to analyse some of the issues affecting current electricity markets and their ability to provide adequate signals to maintain security of supply, both in the short term for efficient system operations, and in the long term to provide sound investment incentives. The Eurelectric study 'Redefining Security of Supply’, published on Eurelectric’s website (here), features a range of economic analyses from Compass Lexecon, including:
- An assessment of the evolving nature of security issues in the electricity system, with a particular focus on the needs for increased flexibility;
- An analysis of the key gaps in the regulatory framework and market design and how this would be addressed;
- A focus on the type of planning and contracting arrangements that could enhance the ability of the market to ensure efficient investment incentives.
The study follows and complements earlier studies to which Compass Lexecon experts contributed, including 'Electricity Market Design Fit for Net Zero' and 'Unlocking the power of contracts for difference (CfDs) to accelerate the energy transition'.