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

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  • Florian Zimmermann
  • Andreas Bublitz
  • Dogan Keles
  • 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 & Wolf Fichtner, 2021. "Cross-border Effects of Capacity Remuneration Mechanisms: The Swiss Case," The Energy Journal, , vol. 42(2), pages 53-90, March.
    • Handle: RePEc:sae:enejou:v:42:y:2021:i:2:p:53-90
    DOI: 10.5547/01956574.42.2.fzim
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    References listed on IDEAS

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    1. Meyer, Roland & Gore, Olga, 2015. "Cross-border effects of capacity mechanisms: Do uncoordinated market design changes contradict the goals of the European market integration?," Energy Economics, Elsevier, vol. 51(C), pages 9-20.
    2. Xavier Lambin and Thomas-Olivier Léautier, 2019. "Cross-border Effects of Capacity Remuneration Schemes in Interconnected Markets: Who is Free-riding?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    3. Bhagwat, Pradyumna C. & Richstein, Jörn C. & Chappin, Emile J.L. & Iychettira, Kaveri K. & De Vries, Laurens J., 2017. "Cross-border effects of capacity mechanisms in interconnected power systems," Utilities Policy, Elsevier, vol. 46(C), pages 33-47.
    4. Bublitz, Andreas & Keles, Dogan & Fichtner, Wolf, 2017. "An analysis of the decline of electricity spot prices in Europe: Who is to blame?," Energy Policy, Elsevier, vol. 107(C), pages 323-336.
    5. Gore, Olga & Vanadzina, Evgenia & Viljainen, Satu, 2016. "Linking the energy-only market and the energy-plus-capacity market," Utilities Policy, Elsevier, vol. 38(C), pages 52-61.
    6. Bublitz, Andreas & Keles, Dogan & Zimmermann, Florian & Fraunholz, Christoph & Fichtner, Wolf, 2019. "A survey on electricity market design: Insights from theory and real-world implementations of capacity remuneration mechanisms," Energy Economics, Elsevier, vol. 80(C), pages 1059-1078.
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    Cited by:

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    4. Signer, Tim & Baumgartner, Nora & Ruppert, Manuel & Sandmeier, Thorben & Fichtner, Wolf, 2024. "Modeling V2G spot market trading: The impact of charging tariffs on economic viability," Energy Policy, Elsevier, vol. 189(C).

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