Market4RES project successfully completed: a look into market design options post 2020

Today, roughly a third of power generation in Europe comes from renewable energy sources. This is, to a large degree, a result of continued support to renewable power generation along with tremendous efforts from the industry to reduce cost and optimize the value chain. Support mechanisms such as feed-in-tariffs (FIT) and priority dispatch have set the road and are helping to significantly reduce the risk for investments. These instruments are key to meet European energy and climate policy objectives, in particular reducing CO2 emissions from fossil-fuel generation, reducing dependency from important and strengthening the European industry.

However, power producers are currently finding it increasingly difficult to recover their investment costs in the current regulatory framework and due to low wholesale electricity prices. This has also raised concerns about the development of security of supply. Low prices are caused by several factors, including an increasing penetration rate of renewable generation with low marginal costs, and low CO2 prices. Another challenge is that electricity prices have become more volatile, and some existing support schemes incentivise generation even at times when electricity prices are negative.

A European discussion has emerged on how to improve electricity market design further. A key point in these discussions is how to reform support instruments for renewables in order to reduce interference with short term market signals and limit public support to new generation assets.

The need for redesigning RES support schemes is mirrored by the need for making markets more fit for RES. The Market4RES project http://market4res.eu/ has assessed the key design features which are critical for the successful participation and integration of renewable electricity producers in a fully liberalised and competitive European market across all periods (day-ahead, intraday and balancing).

In the final report http://market4res.eu/wp-content/uploads/LR-Market4RES-final-publication.pdf, the project presents its results on four main areas of analysis:

  • Integration of short term markets
  • Support schemes for renewables
  • Demand side management
  • Long term capacity markets

Technofi has broadly participated into this project, by leading quantitative analyses on the effect of different RES support schemes on short-term market outcomes and on the impact of a large-scale deployment of demand flexibility. Technofi has also synthetized the outcomes of other qualitative and quantitative analyses into recommendation reports.

Technofi is the main author of 5 reports: