As GermanyEnergyBlog reports, the German government has a green paper out, in which it states that something has to happen in the electricity market to better compensate flexible generation or consumptions (for which they use the term "capacity"). They consider two alternatives: Redesigning the existing market, or simply adding a second market for capacity. In the words of the green paper:

Do we want an optimised electricity market (electricity market 2.0) with a credible legal framework that investors can rely on and which allows electricity consumers to independently determine through their demand how much capacity is maintained – or do we want to set up a further market alongside the electricity market for the maintaining of reserve capacity (capacity market)?

Of course, I link to this discussion because it lies close to what my research has been concerned with the last few years. I favour to solve the issues of trading electricity and trading options on electricity within one market, if possible. This sounds more complex at first, but actually makes it much easier for market participants to be involved with both concepts. Even though my market design proposal ABEM is inspired by dynamic settings with smaller players (e.g. smart grids), the basic idea is applicable even in a larger market setting.

As it happens, an article summarising this proposal has just been accepted for publication in the Journal of Multiagent and Grid Systems.

Furthermore, GermanyEnergyBlog states that ultimately,

acceptance of price peaks in wholesale market is decisive. The key question is whether occasional price peaks in the power market will be accepted.

True, and probably the reason why the second market will come. Onto a world with much more complexity in participating in the electricity markets, where we explicitly pay several players (those with flexibility, or "capacity") for the feat of existing.

I have also looked into this question of peak price acceptance, from the standpoint of mechanism design in a complex setting. I have been interested in indicating whether price patterns are comprehensible and designing dynamic pricing strategies where a maximal price boundary is promised in advance.

05 Nov 2014 - 21:28
# lastedited 18 Jun 2015
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