The Symbiosis of Electricity Market Design and Optimisation
March 13-14, 2024

Summary

The transition to a climate-neutral energy system presents several challenges. One of the primary challenges is managing the high shares of renewable energy, particularly wind and solar, which fundamentally alter the electricity system. The need for extensive grid reinforcement and expansion is another critical issue, as is the requirement for flexibility in electricity consumption to reduce the need for backup power plants and extensive grids. Furthermore, the integration of new energy carriers like hydrogen and the implementation of carbon capture and storage pose additional complexities.

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Challenges

The transition to a climate-neutral energy system presents several challenges. One of the primary challenges is managing the high shares of renewable energy, particularly wind and solar, which fundamentally alter the electricity system. The need for extensive grid reinforcement and expansion is another critical issue, as is the requirement for flexibility in electricity consumption to reduce the need for backup power plants and extensive grids. Furthermore, the integration of new energy carriers like hydrogen and the implementation of carbon capture and storage pose additional complexities.

Solution

To address these challenges, Lenck emphasizes the importance of optimizing market design. This involves considering the demand and supply dynamics, ensuring grid reinforcement at both the transport and distribution levels, and promoting flexible consumption to lower system costs. Market design must also balance the economic trilemma of affordability, sustainability, and security of supply. Effective optimization can provide clear guidelines for investment and incentivize flexibility, ultimately leading to a more efficient and resilient energy system.

Results

Lenck discusses the impact of high renewable energy penetration on electricity prices, noting that increased production from renewables typically leads to lower prices due to their near-zero operational costs. Conversely, reliance on hydrogen for electricity production can result in higher prices. The presentation also highlights the importance of market design in enabling consumers to benefit from low electricity prices while mitigating high prices through optimized consumption patterns. These optimization efforts contribute to a better-understood and more cost-effective energy transition.