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The future design of the electricity market

In: Handbook on Electricity Markets

Author

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  • Michael G. Pollitt

Abstract

In this chapter,we consider the future of electricity markets. We start with a comparison of the PJM market design with the European market design. Next, we discuss how intermittent renewables and flexible demand are stress-testing the current market designs. We proceed with a discussion of the concerns of regulators and how this relates to market design. We then examine the nature of the firm and market choices and how these are directly relevant to future market design. Here we point out that electricity economists emphasise flexible market arrangements whichmaximizewelfare whereas electrical engineers tend tofavourmechanistic pricing arrangements. We conclude with a discussion of potential new market arrangements which are radically different from the current market design, drawing out ideas from the management of the internet, and hybrid arrangements which combine elements of the current designs with radically different arrangements.

Suggested Citation

  • Michael G. Pollitt, 2021. "The future design of the electricity market," Chapters, in: Jean-Michel Glachant & Paul L. Joskow & Michael G. Pollitt (ed.), Handbook on Electricity Markets, chapter 16, pages 428-442, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:18895_16
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    Cited by:

    1. Osińska, Magdalena & Kyzym, Mykola & Khaustova, Victoriia & Ilyash, Olha & Salashenko, Tetiana, 2022. "Does the Ukrainian electricity market correspond to the european model?," Utilities Policy, Elsevier, vol. 79(C).

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