A new study led by the Climate Policy Initiative (CPI) shows that the current European Union (EU) power market design does not effectively support European member states' plan to connect 200 GW of wind and solar power to the transmission system by 2020.
Specifically, the current power market does not do the following:
– use improvements in wind forecasts during the day to optimize European system dispatch to save costs and emissions;
– make effective use of network transmission capacity, thus increasing costs and risking delays for the connection of renewable energy generation; and
– create transparent signals about system constraints to inform transmission network investment decisions.
A review of various market systems across European countries and the U.S. revealed that nodal pricing systems (also known as locational marginal pricing) were the most effective in addressing these issues.
In a simulation study, the consortium compared the current European power market design against nodal pricing and found that adopting this practice increases EU power transfers by up to 34% and provides operational savings from improved congestion management of up to 2 billion euros.
SOURCE Climate Policy Initiative