Electricity markets and RES integration – Key challenges and possible solutions - Towards2030-dialogue Issue Paper #5

As the share of intermittent RES (such as wind turbines and solar PV) increases significantly, their deployment challenges the operation of power systems, and impacts the role played by electricity markets that have not been designed to handle the features of intermittent RES. First of all, intermittent RES feature a variable output that depends on the availability of the resources they are based on (wind does not always blow and sun does not always shine). This variability is worsened by the low-marginal costs of intermittent RES. This means that intermittent RES are willing to generate whenever they can, but only when they can. Second, this output is also difficult to predict accurately, as the output of intermittent RES depends on complex meteorological phenome- na. Third, the best generation sites for intermittent RES such as wind turbines are often located far away from consumption centres, creating the need for significant investment in the transmission system. On the opposite, some resources like solar PV are mostly integrated at the distribution level, creating new kinds of flows from low-voltage level to high-voltage level. Fourth, the development of intermittent RES is still driven by support mechanisms and isolated from most market-signals.

It is therefore clear that electricity market design must be revamped to integrate intermittent RES. On the one hand, electricity markets must cope with the changes in the operation of power systems that are created by the deployment of intermittent RES: new time-definitions must fit RES variability, the day-ahead horizon is not adapted to RES predictability, and existing zones do not reflect the congestion patterns corresponding to the location of intermittent RES. On the other hand, intermittent RES cannot remain at the margin of power sys- tems, and must be more closely integrated into electricity markets.