Navigating Energy-Only Markets: Regulatory Insights from the Recent Crisis

ERRA Regulatory Research Award 2023 2nd Best Paper

Energy-only markets offer a number of attractive features if normal conditions prevail in an electricity market. However, in the event of external disturbances, stemming from short-sighted government policies, interruption in forces of supply, etc., these markets can be marked by substantially high prices. The growing popularity and affordability of renewable energy-based electricity makes the margin of error even smaller. This paper explores the role of energy-only markets in the recent European energy crisis, while drawing a comparison with the US electricity crisis. It also delves into the role of renewables, and proposes the way forward for regulators and policymakers, to prevent similar crises in the future.