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3438. The role of CfDs in future Electricity Markets
Invited abstract in session TD-9: Long-term energy system planning, stream Energy Markets.
Tuesday, 14:30-16:00Room: 10 (building: 116)
Authors (first author is the speaker)
1. | Lena Kitzing
|
Wind and Energy Systems, DTU |
Abstract
Against the backdrop of an ongoing debate on reforming the European electricity market, leading voices in academia and EU institutions agree that electricity markets must be supplemented with additional long-term options, including Contracts-for-Difference (CfDs). A key design question for renewable support schemes in general, and CfDs in particular, is how to prevent electricity market distortions and preserve short-term, operational market integration without jeopardising the effectiveness of the schemes in leveraging investment of private capital for renewable energy deployment. Different experts advocate for different versions and implementation options of CfDs, including generation-based and generation-independent design approaches. Generation-based two-sided CfDs have so far been used in more than 200 auctions across ten European countries, namely Denmark, France, Greece, Hungary, Ireland, Italy, Poland, Portugal, Spain, and the United Kingdom. We show that generation-based CfDs in existing designs can be non-distortive for day-ahead markets. Remaining issues arise through spill-over incentive effects across market segments (e.g. towards intraday, balancing and futures markets). We discuss generation-independent CfDs, which have theoretical advantages over generation-based designs, in particular in relation to intraday and balancing markets, but feature unresolved implementation challenges and would imply rather significant changes in the market.
Keywords
- Energy Policy and Planning
- Electricity Markets
Status: accepted
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