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Electricity prices are the key instrument for coordinating electricity markets. For long-term market analyses, price determination based on fundamental unit commitment simulations is required. Within the European wholesale market, electricity prices result from a market clearing, which finds a welfare-optimal price–quantity tuple considering a coupling of multiple market areas with limited transmission capacity. With increasing exchange capacities in Europe, the precise modeling of the market coupling is required. Many market simulation models use multi-stage approaches with a separation of market coupling and price determination. In this paper, we analyze a new single-stage approach that combines both steps and theoretically and empirically demonstrate its precision by a backtest. For this purpose, we compare a simulated versus a historical electricity price distribution. Moreover, we explain the necessary adjustments for future regulatory developments of the European electricity market regarding flow-based market coupling and propose a concept for the application of future regulatory developments. We demonstrate further developments using a future scenario. [ABSTRACT FROM AUTHOR]

Local flexibility markets (LFMs) are a market-based concept to integrate distributed energy resources into congestion management. However, the activation of flexibility for storage-based flexibility changes the respective state of charge. Compensation in later points of time is needed to regain the original flexibility potential. Therefore, we propose a LFM bid formulation including both flexibility and compensation. Furthermore, flexibility market participation might lead to inc-dec-gaming, i.e., congestion-increasing behavior to maximize profits. However, this inc-dec-gaming might lead to electricity market schedule deviations if LFM offers are not activated. We propose a risk-averse modeling formulation considering the potential non-activation of LFM bids to provide a framework for the assessment of LFM participation comparing different approaches. Our exemplary case studies demonstrate the proposed LFM bid formulation and show the impact of LFM participation modeling on inc-dec-gaming and congestion management costs. [ABSTRACT FROM AUTHOR]

Pathways leading to a carbon neutral future for the German energy system have to deal with the expected phase-out of coal-fired power generation, in addition to the shutdown of nuclear power plants and the rapid ramp-up of photovoltaics and wind power generation. An analysis of the expected impact on electricity market, security of supply, and system stability must consider the European context because of the strong coupling—both from an economic and a system operation point of view—through the cross-border power exchange of Germany with its neighbors. This analysis, complemented by options to improve the existing development plans, is the purpose of this paper. We propose a multilevel energy system modeling, including electricity market, network congestion management, and system stability, to identify challenges for the years 2023 and 2035. Out of the results, we would like to highlight the positive role of innovative combined heat and power (CHP) solutions securing power and heat supply, the importance of a network congestion management utilizing flexibility from sector coupling, and the essential network extension plans. Network congestion and reduced security margins will become the new normal. We conclude that future energy systems require expanded flexibilities in combination with forward planning of operation. [ABSTRACT FROM AUTHOR]