FORESIGHT Climate & Energy 16

A collective effort to create the market we need

Market rules were designed with the sole aim of ensuring security of supply in a way that also guaranteed a profit for generators, with the need to slash greenhouse gas emissions an afterthought at best.

There have, of course, been tweaks made here and there as new technologies emerged and made inroads into the energy mix, but the rulebook has ultimately become outdated. It no longer reflects the needs of the 21st Century’s energy landscape nor the vision for a decarbonised economy by 2050.

Russia’s invasion of Ukraine in early 2022 put Europe’s lawmakers on high alert and sparked talk of a significant overhaul of the rules and regulations as energy prices spiked.

However, major market changes such as those touted tend to spook investors. Any considerable upheaval could delay the energy transition while those who hold the purse strings figure out the best place to put their money. Therefore, little tweaks to the market design will instead help the market make business plans for zero-carbon energy sources.

And the markets can be powerful when the stars align. The significant cost reduction of renewables through technology advancements and effective regulation is a testament to that. The sharp rise in power prices seen in the wake of Russia’s invasion of Ukraine has made clear the need to incentivise cheaper and cleaner green energy.

This is the central message you will find throughout the pages of the 16th special print issue of FORESIGHT Climate & Energy. By installing market frameworks for power purchase agreements or contracts for difference, investors will be able to confidently back clean power projects. Similarly, crafting market regulations specifically for storage capacity will help bolster the business case for solutions of all shapes and sizes.

We also look at whether a change in the way electricity prices are set is needed so that consumers can benefit from cheap renewable energy. And we delve into the role the demand side can increasingly play in the transition if the rules are in place to allow it. Incentivising flexibility on the part of consumers and promoting digital technologies around the edge would mean valuable clean energy can be used more efficiently.

The electricity market can no longer be designed purely around profit and security of supply. It also needs to facilitate the transition to zero carbon.


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