CLUSTER 3: EU Electricity Systems – Market Design


Liberalisation has changed the European electricity system profoundly. It unbundled generation, transmission and distribution of electricity to reduce costs of electricity supply by introducing competition, also across national borders, aiming to create an EU internal market. Further changes lie ahead, because the existing market concept dates from an era in which consumers were by and large considered as passive and in which large-scale, fossil-fuel-fired power stations had the task to satisfy their demand at all times. The implementation of policy goals (e.g. reduction of GHG emission or targets for renewables) has led to deep changes in regulation (EU ETS, renewable support schemes) and has triggered a technological transformation to low-carbon, decentralised resources. This development will have to be accompanied by changes in the market structure, by more regionalisation and by a gradual strengthening of intraday and balancing market as well as their opening for renewables, decentralised resources and the demand-side.


The primary importance is to prepare a new market design which will be able to enable the transformation of the EU power system in the decade 2020-2030 in order to deliver the EU’s 2030 low-carbon and renewable targets in the most cost-effective way. Such a market will need to be integrated at a regional level as aimed by the European Commission to establish a level playing field for all European market actors. The main challenges can be summarized as follows:

• Development of short-term markets (incl. balancing and ancillary services), where VRE can play a role;

• Dealing with variations in demand and supply and overcapacity (flexibility);

• Integration of new actors and decentralised resources;

• Interaction between transmission and distribution system operation;

• Interaction between wholesale and retail markets;

• Management of grid congestion – both at transmission and distribution level;

• Reduction of retail pricing.

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