Analysis of design options for the electricity market: The German case

The effectiveness of the energy-only market (EOM) in providing sufficient incentives for investments is intensively discussed in Europe. While supporters claim that an improved EOM can guarantee generation adequacy, energy suppliers in particular favor the introduction of a capacity market to finance power plant investments. However, there is a lack of quantitative assessment of market design options taking into account individual decisions of market players. Existing studies mainly include a system view based on a central planner optimization. This paper on the other hand is based on an agent-based simulation model for the German electricity market. This method can explicitly incorporate individual investment decisions and aggregate them to present a holistic view of the system.

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