Comparison of European electricity market designs

Presentation and Paper at the GSM 2022 (04.07.2022 – 05.07.2022) in Luzern

The energy system is changing with the expansion of renewable energies. This structural change requires flexibility. This flexibility can be provided by small-scall flexible assets. However, the expansion of large quantities of small-scall flexible assets can only be realized based on profitable business models. Therefore, new marketing strategies for small-scale flexible assets are needed. On the one hand, this challenge is valid for the whole of Europe. On the other hand, marketing strategies are often explicitly developed only for a single country. Although there are efforts to create a common electricity market, the markets are rather different in detail due to the different conditions in each country (composition of generation and demand, history etc.). This leads to the research question, whether it is possible to transfer marketing strategies designed in Germany to other countries. To address this question, in this work, a holistic comparison of the different electricity market designs in Europe is performed.

For this purpose, the following methodology is applied (see Figure 1): first, the system boundaries – both geographical and market design boundaries – are defined. This is followed by the identification of key figures to describe the market mechanisms of the different European market designs. In the last step, the differences between the market design of several European countries are compared to the German market design.

Methodology to compare electricity market designs
Figure 1: Methodology

The geographical boundaries are based on the borders of the European Union, the membership of the power exchanges in the NEMO‑Committee and is extended by the countries United Kingdom and Switzerland due to their central location and political relevance. In addition, smaller countries are pooled, resulting in 26 regions. In total 5 market mechanisms are considered: spot markets, forward markets, balancing services, existence of capacity mechanism and number of bidding zones. The market mechanisms are specified with in total 19 different key figures. 

As a result, the countries Italy, Ireland, Spain, the United Kingdom, and the Czech Republic show the highest deviations from the German market design (see Figure 2). The high rating can be derived mainly from the large (e.g. Italy) or small (e.g. Czech Republic) variety of trading products on the respective markets. In particular, the characteristics of balancing energy are the most influential factor when comparing the countries with each other.

Figure 2 – Deviations in comparison to German market design