European Union retail electricity markets in the Green Transition: The quest for adequate design

Abstract

AbstractAfter a gradual process of reforms, retail electricity markets in Europe are well established. In parallel, the decarbonization agenda and rapid technological progress lead the way toward a renewable‐based and distributed electricity system, in which new business models emerge. Distributed resources, prosumers, and peer‐to‐peer trading are all part of the most likely future scenarios. The newly adopted Clean Energy Package, put forward by the European Commission in 2016, responded to the consensus that existing electricity markets needed to adapt and aimed at putting consumers at the center. But will the ongoing reforms live up to the challenges posed by the coming stages of the ongoing Green Transition? While most recent analyses focus on wholesale issues, the present review narrows this gap. We analyze the European Union (EU) retail electricity market design in isolation, but also in its interaction with the renewable energy policy. We compare the current and the forthcoming legislative framework to elucidate if the recently adopted reforms mitigate conflicts or facilitate complementarities arising from the implementation of the European energy policy framework. While the reforms remove fundamental barriers for consumer participation, several unresolved conflicts remain. Thus, looking forward, there is a significant implementation challenge. Among these are the overdue task of making competition effective, striking the right balance between the verticality and horizontality of the future retail market and confronting market reconfiguration. In this respect, the paper makes several policy recommendations aimed at EU Member States, which are also valid for any jurisdiction willing to advance a transition to renewables.This article is categorized under: Energy and Climate > Economics and Policy Energy Systems Economics > Economics and Policy Energy Policy and Planning > Economics and Policy