Electricity Markets in Europe

This chapter introduces the different European electricity markets and explains the basic principles of these markets and how they are interlinked with each other. Since liberalisation, rules of the markets have been adjusted repeatedly to adapt to new fundamental situations. For example, intraday markets have become relevant with higher shares of renewable energies and the need to balance their uncertain day-ahead forecast in a market close to delivery. The chapter starts with an overview of spot markets, including day-ahead and intraday markets and cross-border trading. Spot markets generally act as a reference for the other markets. But other markets are also crucial for a proper operation of the electricity system. The role of the different markets and mechanisms (derivative markets, control reserve markets, provision of system services, capacity mechanism and congestion management) are discussed in the adjoining subchapters. Furthermore, retail markets and their functioning are described. Besides sections on retail contract types, competition in retail markets and energy poverty, key ratios such as self-supply and autonomy are introduced for the characterisation of decentralised energy sources. As competitive electricity markets in Europe substantially differ from those in North America, this chapter ends with a comparison of the design of European and North American markets.