Два факта за дизайна на пазара на електрическата енергия в контекста на амбицията за дълбока декарбонизация и устойчивост
Two Facts about Electricity Market Design in the Context of the Ambition for Deep Decarbonisation and Sustainability

Author(s): Victor Avramov
Subject(s): Politics / Political Sciences, Politics, Economy, Business Economy / Management, Energy and Environmental Studies, Environmental and Energy policy, EU-Approach / EU-Accession / EU-Development, Socio-Economic Research, Green Transformation
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: electricity market; decarbonization; sustainability
Summary/Abstract: This report focuses on two facts about electricity market design in Europe: the shift of the supply curve to the right with the entry of renewable generation and the relationship between electricity and gas prices. The paper first illustrates, through a simulation with simplified modelling, how the entry of producers with near-zero marginal costs shifts the supply curve to the right and lowers the market price. However, different assumptions about demand elasticity and market behaviour lead to significant variations in the results, showing that market power can play a significant role in market outcomes. Then it continues with an analysis of the relationship between monthly gas and electricity prices in Bulgaria and Germany/Luxembourg with a linear regression revealing very strong relationship (R2 about 0.95). This is also confirmed by data from the European Commission and Eurostat, which note a sharp increase in final prices for industrial and household consumers in the period 2020 – 2023. In conclusion, it is emphasized that although the increasing share of renewable sources reduces average market prices, the day-ahead market price mechanism is the reason for the persistence of a strong relationship between gas and electricity prices. In addition, opportunities for strategic behavior remain, which necessitates the need for additional incentives for reserve capacity and flexibility to ensure security of supply and achieve decarbonization goals.

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