In the book Handbook on the economics of renewable energy
Edward Elgar Publishing, Cheltenham, United Kingdom
Summary
Many liberalized electricity systems are founded upon energy-only market principles which aim to ensure affordable electricity prices. Since the early days of liberalization, it has been questioned whether interactions between market participants, offering and purchasing electricity, provide sufficient investment incentives for safeguarding supply security. Additionally, and as a consequence of the global consensus to drastically reduce carbon emissions, future electricity generation must meet decarbonisation objectives. We argue that market design revisions are possibly inevitable to meet these three main objectives of electricity systems (trilemma): capacity adequacy, emission avoidance and affordability. Results from a Spanish case study demonstrate how changing policy scenarios require additional market mechanisms with significant interdependencies among each other. Here we show how a market mechanism that is not perfectly aligned with the main system objectives, such as renewable payments, is suboptimal to comply with the main objectives. Furthermore, we challenge the premise of cheap green electricity for everyone since the remuneration of additional services increases the total system cost.
Spanish layman's summary:
Se demuestra que la revision del diseño del mercado es inevitable para cumplir los tres principales objetivos de los sistemas eléctricos (trilema): seguridad de suministro, reducción de emisiones y acceso. Los resultados muestran cómo los posibles escenarios requieren nuevos mecanismos de mercado.
English layman's summary:
We argue that market design revisions are possibly inevitable to meet the three main objectives of electricity systems (trilemma): capacity adequacy, emission avoidance and affordability. Spanish case study results demonstrate how changing policy scenarios require interdepend market mechanisms.
Keywords: Energy-only markets, electricity system transition, decarbonisation targets, emission pricing, capacity mechanisms, electricity system model
Editors: del Río González, P.; Ragwitz, M.
ISBN: 978-180037-901-5
DOI of the book: 
https://doi.org/10.4337/9781800379022
Published: 2023
Citation:
T. Gerres, J.P. Chaves, F. Martín, M. Rivier, A. Sánchez, T. Gómez, Guiding the transition: design challenges in decarbonising electricity markets, in Handbook on the economics of renewable energy. Editors del Río González, P.; Ragwitz, M.. Ed. Edward Elgar Publishing. Cheltenham, United Kingdom, 2023.
IIT-23-332L
