Publikationen / Ergebnisse
(Englisch)
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In this project, we have developed a conceptual electricity market model in order to analyse possible interactions of policy interventions such as the full market liberalization, the support of renewable energy technologies by feed-in tariffs, and the introduction of capacity markets. The model includes both, the supply and the demand side of an electricity market. On the retail market, the model covers different regions with one supplier of electricity and one consumer group in each region. Before a potential liberalization, all consumers have to buy electricity from the local supplier. After the liberalization, the consumers have the option to switch to another supplier offering lower prices. However, we account for the fact that consumers don’t have full information about the different suppliers and retail prices in the market and assume that the consumers are heterogeneous regarding their willingness to switch suppliers after a potential market liberalization. On the supply side, the firms can either invest into controllable or stochastic generation technologies for own production and/or trade electricity on the spot market. Firms have to decide about their investments, the prices they offer to their customers, and the operation of the power plants. Further, the model includes a set of policy interventions as mentioned above. Out of the analysis with the conceptual model, a number of interesting results could be educed. An important outcome is that the demand and the supply side of an electricity market are decoupled. This implies that policy interventions on one side of the market do not interact with measures on the other side and therefore require no coordination. For example, instruments supporting renewable energies don’t have to be adjusted in case of market liberalization as it is intended for the future in the case of the Swiss electricity market. Further, the limited willingness of consumers to switch suppliers allows the supplies to exert market power on the retail market, resulting in prices differences across the different regions with suppliers with larger home markets setting higher prices to the smaller competitors. Given the existence of market power on the retail market, sufficient competition on the spot market is of central importance to support an optimal allocation of investments into production facilities and hereby avoid distortions of investment decisions across the different regions. An optimal allocation of investments between the different regions of the market facilitated by a competitive spot market reduces the need for the coordination of political interventions. However, for the case of a not sufficiently competitive spot market, political interventions will likely need to be coordinated. As a complement to the conceptual work in our project, we developed and applied a numerical model with the objective to derive a quantification of potential policy and market design adjustments for the Swiss electricity market. Due to the findings from the conceptual work such as the decoupling of the demand and the supply side, the numerical model focuses on the supply side of the electricity market. However, the results from the numerical analysis are planned to feed back into the demand side of the conceptual model. The numerical model represents the largest suppliers of electricity in the Swiss market as separate firms and the smaller suppliers in an aggregated form. Depending on the market share, these firms are assumed to have different abilities for strategic decision taking. Further, the Swiss electricity market is connected to the four neighbouring market in Germany, France, Italy, and Austria allowing for trade between these markets. Similar to the conceptual model, a set of different policy instruments such as capacity markets, feed-in tariffs, and a quota market is applied to the numerical model. The analysis of the numerical model is currently in process and will be presented in the final project report.
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Schlussbericht
(Englisch)
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Swiss electricity markets are subject to several large-scale changes. Market power is to be reduced with the second phase of market liberalization and renewables are intended to replace nuclear power. In the course of these changes, the current market design will likely have to be adjusted necessitating an adaptation of existing or an introduction of new policy measures and regulatory interventions. In this context, this project explores how political interventions in electricity markets interact and if they need to be coordinated. For this analysis, we develop a conceptual electricity market model including supply and demand representing an imperfectly liberalized market with consumers that are hesitant to switch suppliers. Our results show that demand- and supply-side problems are almost perfectly decoupled. Hence, policy should aim for coordinating interventions on the demand side (such as measures to incentivize supplier switching and the structure of grid tariffs) and, separately, coordinating interventions on the supply side (such as feed-in premiums or tariffs and capacity markets). Focusing on supply side policies, this project further investigates the role of potential policy approaches to support investments (capacity market, feed-in premiums, and a quota mechanism) and the Swiss network structure on investment incentives. Our results show that a zonal reconfiguration of the Swiss electricity market into a Northern and Southern zone does only require coordination with policy targets if such a split is also linked to zonal targets for generation capacities. However, the policy design needs to take into account the potential for strategic company behavior to avoid exploitation and suboptimal investments.
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