Travail de fin d'études et stage[BR]- Travail de fin d'études : The European electricity market, its inefficiencies, and the assessment of possible improvements[BR]- Stage d'insertion professionnelle

Abstract

The objective of this paper is to discuss the European electricity market design. Indeed, there is a heated debate ongoing concerning the need of a refiguration of the latter, fueled by growing inefficiencies: the electricity pricing in the European market is based on a model of large bidding zones, meaning that wholesale markets are cleared as if there was no internal network congestion. However, neglecting the latter, the zonal market clearing may result in infeasible power flows within those bidding zones. This causes issues that are taken care of, generally with the mean of redispatching, which consists in a change in production and consumption patterns at either side of a grid bottleneck to change the flow and relieve congestion. At the early days of market coupling, those congestions were rare and without any bigger consequences. However, with the energy transition and a mismatch between grid and generation expansion, congestion has increased significantly, and pressure on congestion management is increasing. For this paper, a literature review-based approach was adopted to address the question whether adjustments in the zonal market could be sufficient, or if a fundamental change in the latter is required. Three potential options addressing these zonal inefficiencies are presented and analyzed. The aim is to offer a non-biased overview of advantages and disadvantages of each of these options. Two of the options, both consisting in an integral change in the design of the bidding zones (a reconfiguration of bidding zones and a switch to nodal systems) were found to be too disruptive, difficult or time-consuming to implement. A third option analyzed the approach of a market-based redispatch instead of a regulated one. Indeed, this option together with strategic grid reinforcement seems like a cost-efficient and feasible solution, however accompanied by strategic bidding risks which would need to be addressed with the right mitigation strategies.