Reforming European electricity markets: Lessons from the energy crisis

Natalia Fabra

Energy Economics, 2023, vol. 126, issue C

Abstract: The surge in gas prices due to the Ukrainian war has sparked a European energy crisis, triggering discussions about overhauling electricity markets. The European Commission (EC) proposes maintaining short-term electricity markets, fostering long-term Power Purchase Agreements (PPAs) and Contracts-for-Differences (CfDs), and permitting Member States to regulate retail prices during emergencies. This paper proposes a market design aligning with the EC’s plan while introducing additional elements to address its limitations. Notably, it advocates an enhanced reliance on CfDs tailored to the attributes of the generation technologies. This approach seeks to strike a balance by exposing technologies to short-term price signals while allocating investment risks efficiently.

Keywords: Electricity; Energy crisis; Energy transition; Market design (search for similar items in EconPapers)
JEL-codes: D47 L51 L94 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:126:y:2023:i:c:s0140988323004619

DOI: 10.1016/j.eneco.2023.106963

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