Electricity market design

Commissioned by IEA-RETD

Lion Hirth

With FTI CL

2016

How should power markets be designed when variable renewables dominate? For IEA-RETD, in cooperation with FTI CL Energy, we assessed long-term wholesale and retail market design under very high renewable shares. The study analyzes four power system prototypes – energy-only, vertically integrated, hybrid, and prosumer markets – and derives recommendations: remove barriers to scarcity prices, create a level playing field for flexibility, introduce locational signals, and develop risk transfer mechanisms to keep capital-intensive technologies financeable.