The transition to a climate-neutral energy system requires substantial investments in clean energy technologies. Achieving this objective depends on an energy market design that provides efficient investment incentives for both the demand- and supply-side while accounting for evolving framework conditions. Electricity markets, in particular, are undergoing profound structural changes as part of the energy transition: on the supply side, generation is shifting from dispatchable thermal power plants to weather-dependent renewable energy sources, while on the demand side, sector coupling is driving both increased demand and greater flexibility.

These developments are accompanied by technological, meteorological, and regulatory uncertainties, exposing investors and energy consumers to heightened price and volume risks. The Energy Market Design Group therefore focuses on analyzing and quantifying these uncertainties by combining methods from energy system modeling, empirical research, and theoretical industrial organization.

A particular emphasis is placed on the impacts of climate change on the energy system, as well as on the effects of increasing decentralization, sector coupling, and regulatory uncertainty on electricity markets. Building on this, the group investigates implications for a future-oriented energy market design and develops suitable instruments for risk mitigation. Key research areas include, among others, different designs of tariffs for energy consumers, Contracts for Difference for renewable energy, and capacity mechanisms and other measures to ensure security of supply.

Overview of the research topic of the working group energy market design

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Price formation in a highly renewable electricity market scenario

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Schematic Overview of a sector-coupled power system model

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Optimal strike prices of wind onshore power plants in Denmark (DK), Spain (ES) and France (FR) with two different profiles each within auctions for three different Contracts for Difference designs

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Illustration of difference payments within a two-way Contract for Difference with constant reference price

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Schematic overview of methodology to identify critical security of supply event under the consideration of climate projections within the project REWARDS

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Illustration of the project REFRAME that investigates risks in an increasingly decentralised energy system

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Empirically observed day-ahead market price bids from solar power plants in Spain

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