IEEE Power & Energy Magazine - January/February 2021 - 20
Markets for Efficient
Decarbonization
By Carlos Batlle, Pablo Rodilla, and
Paolo Mastropietro
I
IN THE 1980S, SOME SEMINAL WORKS SUCH AS MARKETS FOR POWER: AN ANALYSIS
of Electric Utility Deregulation by Joskow and Schmalensee and Spot Pricing of Electricity by Schweppe et al. set the foundations for electric power system restructuring toward a
fully liberalized, marginal price-based market environment in which generators and end users
trade. Even then, it was clear that the task was not going to be easy, but an increasingly
and always significant portion of the industry and academic community thought
that it was at least possible. More than three decades after the first
power markets were implemented, the entire " power sector
community " continues to discuss the suitability of
relying on short-term market prices as an
efficient signal to drive investments,
especially in the current context in
which not only traditional generators but also end users can
decide to invest in energy supply resources, and an increasing amount of new generation
investments have zero or close
to zero variable costs, which
some people see as a threat to the
short-term market paradigm.
In this article, we discuss the reasons behind the widespread implementation of regulatory-driven, long-term market mechanisms, such as capacity mechanisms
or auctions for renewables, storage, or demand
response. As a consequence of the former, we argue
that in the current (and even more in the upcoming) context, rather than discussing the suitability of relying on any
sort of regulatory-driven market or pseudomarket mechanism
that provides long-term signals, research efforts should focus
on which mechanisms should be introduced and how they
should be designed and what modifications of market rules
are needed to allow for efficient interaction between shortterm market prices and long-term complementary signals.
Digital Object Identifier 10.1109/MPE.2020.3033393
Date of current version: 6 January 2021
20
ieee power & energy magazine
1540-7977/21©2021IEEE
january/february 2021
IEEE Power & Energy Magazine - January/February 2021
Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - January/February 2021
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