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Cross-border Effects of Capacity Remuneration Mechanisms: The Swiss Case

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  • Florian Zimmermann, Andreas Bublitz, Dogan Keles, and Wolf Fichtner

Abstract

In this article, cross-border effects of different market design options are analyzed using Switzerland, which is strongly interconnected to larger neighboring markets, as a case study. An investigation is conducted with an agent-based model where in one scenario, all market designs are represented according to the current legislation, and in another, energy-only markets (EOM) are assumed in all considered countries. The results show that wholesale electricity prices are highly dependent on the chosen market design and in the annual average are up to 27% higher in the EOM scenario. Due to expected larger interconnector capacities, this increase is evident in all simulated markets. Furthermore, the results indicate that the planned market design changes in the neighboring countries decrease investments in Switzerland. However, generation adequacy is still guaranteed due to the high Swiss hydropower storage capacity. Our results suggest that, under the current circumstances, a domestic mechanism in Switzerland is not required.

Suggested Citation

  • Florian Zimmermann, Andreas Bublitz, Dogan Keles, and Wolf Fichtner, 2021. "Cross-border Effects of Capacity Remuneration Mechanisms: The Swiss Case," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 53-90.
    • Handle: RePEc:aen:journl:ej42-2-zimmermann
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    Cited by:

    1. Fraunholz, Christoph & Miskiw, Kim K. & Kraft, Emil & Fichtner, Wolf & Weber, Christoph, 2021. "On the role of risk aversion and market design in capacity expansion planning," Working Paper Series in Production and Energy 62, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    2. Zimmermann, Florian & Keles, Dogan, 2023. "State or market: Investments in new nuclear power plants in France and their domestic and cross-border effects," Energy Policy, Elsevier, vol. 173(C).
    3. Zimmermann, Florian & Keles, Dogan, 2022. "State or market: Investments in new nuclear power plants in France and their domestic and cross-border effects," Working Paper Series in Production and Energy 64, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    4. Misconel, S. & Leisen, R. & Mikurda, J. & Zimmermann, F. & Fraunholz, C. & Fichtner, W. & Möst, D. & Weber, C., 2022. "Systematic comparison of high-resolution electricity system modeling approaches focusing on investment, dispatch and generation adequacy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 153(C).
    5. Astier, Nicolas & Ovaere, Marten, 2022. "Reliability standards and generation adequacy assessments for interconnected electricity systems," Energy Policy, Elsevier, vol. 168(C).

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    JEL classification:

    • F0 - International Economics - - General

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