Throughout Europe, animated power market design discussions are going on. Although there are a lot of different approaches to market design, one consensus is emerging: It is a no-regret option to make the short-term energy markets more flexible. The reason lies in the fact that European power systems are increasingly shaped by wind and solar power, leading to more fluctuating production patterns. Thus, refinements of the design of short-term markets that contribute to system flexibility are essential.
By improving the design of short-term markets (day-ahead, intraday and balancing markets and imbalance settlement rules) – which is where the demand for flexibility is met –we can improve price formation to provide flexibility efficiently.
The Pentalateral Energy Forum (PLEF), consisting of Austria, Belgium, France, Germany, Luxembourg, the Netherlands and Switzerland, a region with a strong track record of regional cooperation and advanced power market integration, is currently working on options to make their power markets more flexible. Our study aims to contribute to the ongoing debate by identifying key market design elements that efficiently enable flexibility and further market integration.