Market model 2.0 – Technical background

Original title: Markedsmodel 2.0 - Teknisk baggrundsrapport

The Danish TSO is leading a large project on how to design the future Danish electricity market facing among others challenges of including large shares of intermittent renewable energy in the system.
The project consisted of six different ‘work tracks’ analysing different challenges related to the future power market regulation. Copenhagen Economics was commissioned manage the overarching task of assessing socioeconomic welfare implications of the different options proposed in the ‘work tracks’.

We assisted in developing a methodology linking several of’s existing models and building new models catering for the specific needs of the project.

Our approach was to ensuring theoretical consistency between input and outputs of the different models. Specifically, we linked a socioeconomic hourly based power market model to the private economic optimisation behaviour of Danish power producers and consequently the implications for energy security. We assessed among others the total cost of production and energy security implications in a market with a capacity mechanism, a strategic reserve and more market-based prices for balancing servicesThe project resulted in recommendations and principles for revised power market regulation.

Throughout the process, key external stakeholders was involved in process, which ensured ‘buy-in’ on key methodological and analytical aspects.