A Future-proof Market Design must be based on Efficient Price Signals

Moving the customer to centre stage requires market design adjustments in addition to ICT innovation. Demand must become responsive, the effects of taxes and levies, which can blunt price signals, need to be reduced, RES have to be integrated into the market, hedging products have to develop and prices reflecting actual scarcity need to be introduced.

We believe that such scarcity prices – wholesale price spikes reflecting temporary scarcity situations (e. g., periods of low wind or solar and high demand) – are central to enabling the future market design to ensure power system adequacy and efficiency resilience and to mobilise effective end-consumers’ participation in markets. Prices reflecting actual scarcities, rising to ‘sufficiently high levels’ frequently enough, will incentivise market parties to invest in flexible generation, storage or demand-response.