CRE Publication on Re-thinking the design of power markets
Beyond the short-term issues, the energy crisis in Europe raises long-term questions that are disrupting the organisation of the electricity markets: security of supply, price levels and volatility, investments in the energy transition, costs for consumers, etc. CRE France held its Symposium in December 2022 on this topic and the speakers/ group of academics completed a report with a review of the academic literature on the issues of the reform of the European electricity market.
While this document does not address all of the issues related to the electricity market debate, it covers the following topics:
- Short-term issues such as keeping the short-term market working, how to assess the taxing of infra-marginal rents and locational marginal pricing
- Long-term choices about production assets and technology choices. For example, technological challenges with a carbon price and taxonomy, the case for (or against) capacity markets, and long-term contracts and their design.
The document also addresses more aggregate issues that are especially relevant for public decision-makers during the crisis period. These issues include:
- Protecting against extreme wholesale prices of electricity
- Cushioning the aggregate shock for private agents
Each item is addressed in a specific note that articulates two sections, one centered on economic analysis, the other on empirical implications, and, most importantly, broad recommendations for policymakers.