The main goal of this term paper is to give an overview about differences within the European market and their advantages and disadvantages. Additionally the historical development of energy markets and the future perspective, influenced by the development of the renewables shall be pointed out.
The next part, after this introduction, is about the historical development of the electric power market in Europe with a focus on the German market liberalization. In section three, the two different market models Open-Market model and Pool-Market model are discussed. After an explanation and a comparison of the two models, the trend towards renewables is taken into account. The focus lays on the development, the integration into the different existing electricity-markets in Germany and Spain and on their impacts on these markets.
Based on a study of Makkonen et al. from 2012, published in the journal Energy Policy an extensive outlook in future requirements, changes and possibilities of the development of a single European Electricity Market, this term paper will be concluded.
Table of Contents
1 Introduction
2 Development of the European Electric Power Market with Focus on Germany
3 Differences in Electricity Market Models in Europe
3.1 The Open-Market Model
3.2 The Pool-Market Model
3.3 Discussion of the Two Models
4 Development and Integration of Renewables on European Markets
5 Outlook and Conclusion
Research Objectives and Core Themes
The primary goal of this paper is to provide a comprehensive analysis of the evolution of the European electric power market, specifically examining the structural differences between the open-market and pool-market models and their respective advantages and disadvantages in the context of increasing renewable energy integration.
- Historical evolution of market liberalization in Germany and Europe.
- Comparative analysis of Open-Market and Pool-Market models.
- Challenges and strategies for integrating renewable energy sources into existing grids.
- Future prospects for a unified European electricity market based on Delphi study insights.
Extract from the Book
3.2 The Pool-Market Model
The second big European electricity-trading model is the pool-market model. This model is distinguished by the existence of side payments of the open-market model. Energy generators give information about their marginal production costs and certain other variables like their production capacity into the pool. By doing this, they place a bid with the expectation to be accepted. In the pool a central pool manager is installed to solve the resulting allocation problem and to compute a price. Based upon this price some bids get accepted and the contract is created. If this price is lower than the marginal costs of some generators, they would incur a loss. To avoid this, the pool-market model makes side payments to cover these losses (cf. Stoft, 2002, p. 88 f.).
As the pool manager is responsible for calculating the market price, his task is the consideration of a sufficiently high enough side payment. Another task is to determine a surcharge to be able to compensate possible grid defiles (cf. Ströbele et al. 2010, p. 234 f.). Another instance in the pool model is the Transmission System Operator (TSO), whose responsibility is to guarantee the stability of the power grid to avoid blackouts or breakdowns. The TSO must be part of a non-commercial organization, to be free of economic interests (cf. NordPool Spot AS, 2013, p. 5).
Summary of Chapters
1 Introduction: This chapter introduces the fundamental concepts of electricity, power, and energy, and outlines the scope of the paper regarding market development and liberalization.
2 Development of the European Electric Power Market with Focus on Germany: This section details the transition from monopolistic utility structures to a liberalized market through various European legislative packages and the unbundling of grid operations.
3 Differences in Electricity Market Models in Europe: This chapter analyzes the structural variations between the Open-Market and Pool-Market models, including their mechanisms for trading and price determination.
3.1 The Open-Market Model: Explains the structure of the open market, divided into futures and spot markets, and discusses the role of OTC versus stock-exchange trading.
3.2 The Pool-Market Model: Describes the pool model, highlighting the role of the pool manager, side payments, and the specific operations of entities like NordPool.
3.3 Discussion of the Two Models: Provides a comparative evaluation, weighing the efficiency of price discovery against grid optimization and complexity challenges.
4 Development and Integration of Renewables on European Markets: Discusses the transition toward renewable energy, government support schemes such as feed-in tariffs in Germany and feed-in premiums in Spain, and the technical challenges of unpredictable supply.
5 Outlook and Conclusion: Summarizes future requirements for a single European electricity market, citing a Delphi study on grid bottlenecks and the potential role of new energy storage technologies.
Keywords
Electricity Market, Market Liberalization, Open-Market Model, Pool-Market Model, Renewable Energy, Feed-in Tariffs, NordPool, European Energy Exchange, Grid Stability, Transmission System Operators, Energy Policy, Market Integration, Delphi-Method, Energy Volatility, Sustainability
Frequently Asked Questions
What is the core focus of this research paper?
The paper examines the historical development and structural evolution of European electricity markets, focusing on the transition from monopolistic systems to liberalized market frameworks.
What are the primary electricity market models discussed?
The paper distinguishes between the Open-Market model, common in countries like Germany, and the Pool-Market model, exemplified by the NordPool system in Scandinavia.
What is the main objective of the analysis?
The goal is to compare the advantages and disadvantages of different market models and to evaluate how governmental support mechanisms affect the integration of renewable energy sources.
Which scientific methodology is primarily referenced?
The paper draws upon literature regarding electricity market design and utilizes a Delphi-method study to estimate future market requirements and the feasibility of a single European electricity market by 2030.
What topics are covered in the main body?
The main body covers the legislative history of energy market liberalization, the mechanical differences between open and pool markets, and the specific strategies used by Germany and Spain to foster renewable energy growth.
How would you summarize the key characteristics of this market?
The sector is defined by high energy volatility, low substitutability, the challenge of grid storage, and a transition toward policy-driven renewable energy support.
What is the specific role of the "pool manager" in the Pool-Market model?
The pool manager is responsible for aggregating information about production costs and capacity to calculate a market clearing price and managing side payments to ensure generators cover their marginal costs.
How did the Japanese nuclear disaster influence the conclusions?
The Fukushima incident is cited as a catalyst for radical changes in energy policy, specifically forcing the German government to accelerate its exit from nuclear power, which necessitates a faster shift toward renewables.
What do the experts in the cited Delphi study identify as the most critical bottleneck?
The study highlights transmission grid limitations at country borders as the most significant obstacle to creating a unified European electricity market.
- Arbeit zitieren
- Nicolai Westsee (Autor:in), 2013, Analysis of the German and European Electric Power Market, München, GRIN Verlag, https://www.hausarbeiten.de/document/270581
