HAL will be down for maintenance from Friday, June 10 at 4pm through Monday, June 13 at 9am. More information
Skip to Main content Skip to Navigation
Preprints, Working Papers, ...

Long-term issues with the energy-only market design in the context of electricity decarbonization: Insights from a system dynamics simulation model

Abstract : Decarbonization of energy systems is challenging but needs to happen. Despite a rich literature on energy transitions and electricity markets, there is a scant literature analyzing (1) how an energy-only market (EOM) design may yield energy mix trajectories that are compatible with decarbonization objectives and (2) the role of underlying investor behavior assumptions. This paper intends to bridge this gap and illustrate both aspects through electricity market model simulations. We study an illustrative case inspired by the Californian power system and highlight two main findings. First, an EOM complemented with a carbon price signal can reproduce the optimal mix trajectory but required assumptions are demanding and unrealistic (e.g. perfect rationality, full information about fundamentals, perfect coordination between decommissioning and investment decisions). Second, we characterize how the EOM-induced mix trajectory can considerably deviate from optimality when we relax these assumptions. We conclude that the desirable theoretical properties of an EOM are not robust to practical investor behaviors. Meeting decarbonization targets thus calls for a change in market design paradigm toward hybrid markets that combine a dedicated long-term investment module with short-term wholesale markets as we know them today.
Document type :
Preprints, Working Papers, ...
Complete list of metadata

https://hal.archives-ouvertes.fr/hal-03526752
Contributor : Alexis Lebeau Connect in order to contact the contributor
Submitted on : Friday, January 14, 2022 - 4:46:26 PM
Last modification on : Saturday, April 2, 2022 - 3:39:36 AM
Long-term archiving on: : Friday, April 15, 2022 - 7:13:12 PM

File

LONG-TERM_ISSUES_WITH_THE_ENER...
Files produced by the author(s)

Identifiers

  • HAL Id : hal-03526752, version 1

Citation

Alexis Lebeau, Marie Petitet, Marcelo Saguan, Simon Quemin. Long-term issues with the energy-only market design in the context of electricity decarbonization: Insights from a system dynamics simulation model. 2022. ⟨hal-03526752⟩

Share

Metrics

Record views

43

Files downloads

11