Energy experts of Compass Lexecon advised the pan-European electricity industry association, Eurelectric, on a market design reform study in Europe for the transition to a net-zero economy by 2050.
The dramatic electricity price increases in Europe in the past years have led policy makers to call for a reform of the European electricity market. The European Commission recently presented a new legislative package to reform the electricity market.
Compass Lexecon supported Eurelectric as its Knowledge Partner to explore the impact of the energy crisis on market design, as well as the challenges and necessary reforms to implement a market design fit for decarbonisation.
The report published on Eurelectric’s website (here) provides a diagnosis and gap analysis of the current market design arrangements to address Europe’s policy objectives. Compass Lexecon experts provided economic analysis of potential alternative options for market design by drawing from an extensive review of international case studies as well as more innovative academic proposals emerging in the fast-moving policy debate.
To support an efficient transition towards net-zero, our study recommends preserving the internal EU energy market, which ensures efficient dispatch signals and cross-border trading, and complementing it with three key pillars to:
- a consumer contracting and engagement framework, based on enhanced forward hedging opportunities and retail price structures;
- an investment framework underpinned by enhanced long-term hedging/contracting opportunities; and
- a framework to coordinate the future system needs to meet security of supply and policy objectives.
A presentation with the key insights of the report is also available on Eurelectric’s website here.