At a market design workshop of the Pentalateral Energy Forum hosted by Agora Energiewende in Berlin, Mike Hogan addressed the question of how the electricity market can drive the right investments to ensure a reliable low-carbon transition at least cost. Mr. Hogan’s presentation describes how market design, market rules, and market operations are at the centre of this process.

Rather than begin from the question of which market design is best able to deliver a given quantity of investment, recent studies have illuminated the importance of asking first what kind of investment is best suited to the needs of a low-carbon power system. The least-cost reliability solution will be delivered not by a market that perpetuates investment in “more of the same.” An effective solution adapts market rules and system operations to reflect the emerging resource mix and, in the process, shifts investment from a legacy resource mix dominated by inflexible baseload generation, to one that can efficiently complement production from a growing share of variable resources.

The Energy Ministers from Belgium, the Netherlands, Luxembourg, Germany, and France created the Pentalateral Energy Forum in 2005 to promote collaboration on the cross-border exchange of electricity. They have since been joined by Austria and Switzerland.