Electricity Markets in Transition and Crisis: Balancing Efficiency, Equity, and Security

Tooraj Jamasb*, Rabindra Nepal, Daniel Davi-Arderius

*Corresponding author for this work

Research output: Working paperResearch

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Abstract

Two electricity market crises following the lifting of post-Covid restrictions in 2021 and the natural gas supply interruptions in 2022, challenged the functioning of the EU electricity market and its design. This paper argues that the market design was already ripe for an overhaul as the efficient market paradigm has gradually given way to as instrument of cost-effective attainment of green targets and balancing of the elements of energy trilemma. We discuss the linkages between the long-term and short-term markets. While policy interventions to alleviate short-term affordability are important, they cannot constraint the long-term sustainability and security of supply. Short-term electricity markets have, technically, worked according to design. However, the distributional implications of them call for revisiting how resources are allocated to and operate in the market. We revisit several dimensions of market design with a view to the recent calls and to review and overhaul them such as windfall tax, contract for differences, market decoupling etc.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherDepartment of Economics. Copenhagen Business School
Number of pages28
Publication statusPublished - 2023
SeriesWorking Paper / Department of Economics. Copenhagen Business School
Number04-2023
SeriesCSEI Working Paper
Number2023-04

Keywords

  • Electricity
  • Market design
  • Energy markets
  • Natural gas
  • Energy reform
  • Affordability
  • Security of supply
  • Sustainability

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