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The future developments of the electricity prices in view of the implementation of the Paris Agreements: Will the current trends prevail, or a reversal is ahead?

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  • Panos, Evangelos
  • Densing, Martin

Abstract

We assess the impact on the European electricity market of the European Union “Clean energy for all Europeans” package, which implements the EU Nationally Determined Contribution in Paris COP 21. We focus on the year 2030, which is the year with defined climate targets. For the assessment, we employ a game-theoretic framework of the wholesale electricity market, with high technical detail. The model is applied to two core scenarios, a Base scenario and a Low Carbon scenario to provide insights regarding the future electricity capacity, generation mix, cross-border trade and electricity prices. We also assess three additional variants of the core scenarios concerning different levels of: a) fossil and CO2 prices; b) additional flexibility provided by batteries; c) market integration. We find that the electricity prices in 2030 substantially increase from today's level, driven by the increase in fuel and CO2 prices. The flexibility from batteries helps in mitigating the price peaks and the price volatility. The increased low marginal cost electricity generation, the expansion of non-dispatchable and distributed capacities, and the higher market integration further reduce the market power from producers in the electricity markets from today's level.

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  • Panos, Evangelos & Densing, Martin, 2019. "The future developments of the electricity prices in view of the implementation of the Paris Agreements: Will the current trends prevail, or a reversal is ahead?," Energy Economics, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:eneeco:v:84:y:2019:i:c:s0140988319302579
    DOI: 10.1016/j.eneco.2019.104476
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    13. Diana Bottger & Philipp Hartel, 2021. "On Wholesale Electricity Prices and Market Values in a Carbon-Neutral Energy System," Papers 2105.01127, arXiv.org.
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