The Market Design Initiative and Path Dependency: Smart retirement of old, high-carbon, inflexible capacity as a prerequisite for a successful market design

In October 2014, EU leaders set new EU climate and energy targets for 2030.3 In its Communication launching the consultation on “a new energy market design”, the European Commission highlights that the targets imply a share of renewable electricity in the European power system of up to 50% by 2030.

The Commission goes on to argue that the European power system will need to be much more
flexible than it is today, on both the supply and the demand side, in order to integrate such share of renewable electricity into the power system. This in turn calls for market arrangements that can drive the investments in supply side and demand side resources with the flexibility the market will need.

This clear and unambiguous statement is highly welcome and is consistent with numerous studies on least cost pathways to a secure, affordable and sustainable power system.

While the Commission is to be applauded for clearly elucidating the flexibility challenge, it failed
to address the challenges facing the transition as a consequence of the legacy of past investment decisions.

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Published November 18, 2015
Found in EnergyFossil FuelsRenewable EnergyRule of law