Markets and Investments

What needs to be done in terms of market design and policy changes if companies are to create a flexible energy system?  Companies respond to market signals and policy incentives, and these are the subject of this workstream.  Which of the technical solutions explored in the other workstreams will be adopted by companies that are measured by the profits they earn in an uncertain world?  The objectives of the work are to:

• assess (in techno-economic terms) different ways of providing flexibility
• design market rules and network access arrangements that favour these
• predict the impact of different rules and incentives on investment decisions

Meeting these objectives will allow us to select those rules most likely to promote effective ways of providing flexibility

This work follows on from the System Evolution and Decentralised Operation and Control work packages of Phase 1, which studied different market rules and investment patterns.  In this work package, we will build on the earlier work to focus on uncertainty and the need for flexibility.  There is a large and growing literature on electricity market design and on investment decisions, but very little of it considers the detailed interaction between the two that will be needed to meet our objectives.  In assessing market rules and network access arrangements, we will consider their impact on investment, particularly on those investments identified as most effective in promoting flexibility.

Projects within this workstream will consider issues of market design, and of investment in networks, generation and demand-side measures.  Another project will study coordination between these, and evaluate the benefits of doing so.  We will also study ways in which governments might commit themselves to providing a stable policy framework over the long timescales required to make investment worthwhile.

Contact Workstream leader: Richard Green