Joint project "Assessing future electricity markets"

Under the Swiss Energy Strategy 2050 (ES2050), Switzerland has committed to increasing the share of renewable energy (RE) in domestic electricity generation. This raises a number of potential challenges and fundamental questions, which provide the basic context and motivation for this project:

• In the absence of regulation aimed at supporting RE, can the market alone achieve the envisaged targets?
• Does a higher share of RE jeopardise the reliability of the Swiss electricity system and create long-term problems for generation adequacy?
• What types of alternative market designs and flexibility mechanisms would be needed to alleviate potential reliability problems?

AFEM aimed at investigating the fundamental questions laid out above by developing and employing a novel quantitative simulation-based approach of the Swiss electricity wholesale market. This approach uses Swiss-specific and European-wide models coherently integrated to achieve multi-temporal and multi-spatial evaluation of the future of the Swiss electricity market. Several possible future market designs will be assessed based on their performance and ability to achieve the targets set out in the ES2050, including the envisaged nuclear phase-out and expanded integration of RE resources. As a framework, AFEM utilises a consistent coupling of the different model layers and cross-disciplinary approaches covering the technical, market and policy aspects in order to enhance current decision-making and provide consistent long-term and short-term assessments on investments, operation and security aspects.

The results, derived from the combined AFEM model framework and scenario assessments of the Swiss electricity system, are as follows:

• Model capabilities: Assessments of the transformation of the Swiss electricity system should be embedded in an integrated modelling framework to obtain consistent results.
• Market operation: The existing hydro assets, the projected Swiss transmission network, and the available import and export capacities are well suited to ensuring the stable short-term operation of future electricity markets.
• Market dynamics: The price levels and dynamics will be largely shaped by global and European drivers (fuel prices, carbon tax prices). However, the hourly price dynamics may both pose threats and present opportunities for storage and RE operators.
• Renewable energy support: Without RE support schemes, only minimal amounts of domestic RE investments are achieved, making Switzerland an annual net importer.
• Capacity and balancing market mechanisms: These mechanisms would have virtually no impact on investments in generation capacity and the Swiss wholesale electricity market.
• RE potentials: Solar power is a more cost-effective, available and predictable RE resource for Switzerland than wind.
• Transmission network reliability: The Swiss electricity grid is sufficient to support the change in flow patterns anticipated in future years.

Relevance for research

A clearly innovative aspect of this research has been the integration of technical and engineering-based models with economic and market models to create a coupled framework.

Relevance for practice

This work has implications for the ongoing energy policy debate in Switzerland:

• support for RE is needed to achieve the envisaged Swiss RE targets;
• the current market design is well suited to future market operation, and Swiss hydropower will provide sufficient flexibility to cope with future RE dynamics; /li>
• the planned extensions to the Swiss electricity grid are sufficient to ensure its reliability in years to come.

Assessing Future Electricity Markets (AFEM)

The joint project consists of three research projects

Infrastructure for Future Electricity Markets (AFEM-INFRA)

• Dr. Turhan Hilmi Demiray, Forschungsstelle Energienetze, ETH Zürich; Prof. Reza Abhari, Prof. Martin Raubal

Combining Electricity Models (AFEM-MODEL)

• Prof. Hannes Weigt, Wirtschaftswissenschaftliche Fakultät, Universität Basel; Prof. Reza Abhari, Dr. Ndaona Chokani

FUTURE - Future Electricity Market Models

• Prof. Sebastian Rausch, Centre for Energy Policy Economics, ETH Zürich; Dr. Jan Abrell, Dr. Christian Schaffner, Prof. Hannes Weigt