Abstract

The talk will present a multilevel optimization approach that allows to analyze the long-run impact of electricity market design on investment and production decisions. The presentation will give an overview over various recent contributions that focus on electricity markets that operate under a zonal pricing market design, as it is established in Europe. We apply the approach to the German electricity market as an example to demonstrate the impact of (i) the establishment of additional price zones, (ii) regionally differentiated network fees (iii) market-driven RES curtailment on key performance indicators such as welfare, economic rents, generation mix and locations, network investment, or electricity prices in the long run. We also show how the model can be used to endogenously determine an optimal configuration of price zones on a network, or to assess the long run impact of structural (regulatory) uncertainty about the future market design.

The talk will present work with various coauthors which will be mentioned along the presentation.