Electricity market design

Underpinning the functioning of power systems is electricity market design. Recognising that each country circumstance is unique, the IEA works to identify appropriate electricity market models that support the development of secure, sustainable, and affordable power systems. Much of the IEA’s current work focuses on developing markets fit to support the transition to systems dominated by low-carbon sources of electricity. 

Re-powering Markets: Market design and regulation during the transition to low-carbon power systems

Published: 18 February 2016

"Re-powering" refers to the process of replacing older power stations with ones that are more efficient and more powerful, but the term also lends itself to market design. To facilitate the transition to a low-carbon economy, electricity markets will need to be "re-powered": older market frameworks must be replaced with ones suitable for decarbonisation while ensuring a secure electricity supply. Market rules need to be modernised and better matched with lowcarbon policies while keeping the same overall market architecture.

Re-powering electricity markets can be done in several ways, depending on the existing market design or regulatory framework. Changes can be as limited as increasing the temporal or geographical resolution of existing markets or putting a price on scarcity, or as extensive as creating short-term markets and incorporating policies to increase renewables and reduce carbon emissions as part of a consistent market framework.

Re-Powering Markets brings together today’s best practices in new electricity market design and details the most effective and efficient ways for re-powering electricity markets to address the 21st century challenges of transitioning to low-carbon electricity.

Our work on Electricity