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Electricity Wholesale Markets: Designs Now and in a Low-carbon Future

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  • Richard Green

Abstract

This paper compares electricity wholesale markets in the United States and Europe. The Standard Market Design in the US involves an independent system operator, nodal pricing with financial transmission rights, and integrated markets for capacity and ancillary services. In Europe, there are national, or occasionally zonal, spot markets run by companies independent of the transmission operator, and of the latter’s purchases of ancillary services. As the amount of low-carbon generation increases, prices and transmission constraints are likely to become more volatile, increasing the need to adopt an efficient market design. In most respects, the US standard market design is likely to give better results than the European models.

Suggested Citation

  • Richard Green, 2008. "Electricity Wholesale Markets: Designs Now and in a Low-carbon Future," The Energy Journal, , vol. 29(2_suppl), pages 95-124, December.
    • Handle: RePEc:sae:enejou:v:29:y:2008:i:2_suppl:p:95-124
    DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI2-6
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    References listed on IDEAS

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    1. Felix Müsgens & Karsten Neuhoff, 2006. "Modelling Dynamic Constraints in Electricity Markets and the Costs of Uncertain Wind Output," Working Papers EPRG 0514, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Joskow, Paul L., 2008. "Capacity payments in imperfect electricity markets: Need and design," Utilities Policy, Elsevier, vol. 16(3), pages 159-170, September.
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    Cited by:

    1. Zhou, Zhi & Botterud, Audun & Levin, Todd, 2025. "Price formation in zero-carbon electricity markets – Fundamentals, challenges, and research needs," Renewable and Sustainable Energy Reviews, Elsevier, vol. 211(C).

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