European electricity markets experienced an exceptional stress test in 2021–2023, raising renewed questions about how marginal pricing and the merit‑order mechanism perform under extreme fuel and carbon price shocks. This paper provides a unit‑level empirical assessment of these dynamics for Poland, an electricity system still dominated by coal, with a smaller but growing Combined-Cycle Gas Turbines (CCGTs) fleet and rapidly rising renewables. A transparent short‑run marginal cost (SRMC) model for all centrally dispatched hard‑coal, lignite, and gas‑fired units has been constructed and presented annual merit‑order stacks for 2021–2023. The analysis decomposes SRMC into fuel, transport (hard coal), and EU ETS (Emissions Trading System) components to attribute observed reranking to interpretable cost channels rather than aggregate price movements. The results document a clear crisis‑related reshuffling: record gas prices in 2022 pushed CCGT units markedly rightwards, while the highest‑cost tail remained anchored in the oldest hard‑coal units in all three years. A structured ±25% sensitivity analysis demonstrates robust, technology‑specific exposure profiles: SRMC is fuel‑driven for CCGT, carbon‑driven (EU-ETS) for lignite, and jointly driven by coal and EU ETS costs for hard coal. These results provide a replicable empirical basis for economically coherent phase‑out sequencing and clarify how fossil‑price shocks transmit through marginal pricing to the European electricity market. Policy implications align with the emerging European consensus: maintain marginal pricing for dispatch efficiency, while reducing exposure to fossil‑driven marginality through long‑term contracting, targeted adequacy mechanisms, and accelerated deployment of low‑carbon flexibility
Tag: Electricity market design
Resource Adequacy with Increasing Shares of Wind and Solar Power: A Comparison of European and U.S. Electricity Market Designs
We raise the question if improvements to current energy-only markets are sufficient to maintain resource adequacy in electricity markets or whether the rapid increase in wind and solar power gives stronger arguments for additional capacity mechanisms. A comparative analysis between Europe and the United States reveals some fundamental differences, but also many similarities in electricity…
How Renewable Energy is Reshaping Europe’s Electricity Market Design
We present a systematic review of the challenges to the regulation of electricity markets that are posed by the integration of variable renewable energy sources. System integration is the key to developing the required flexibility, because flexibility options exist at all system levels and within the competitive as well as in the regulated (network) domains….
A regulatory framework for an evolving electricity sector: Highlights of the MIT utility of the future study
The electric power sector is once again evolving. A variety of distributed energy resources and improving computation, communication, and control technologies create an unprecedented degree of choice for electricity consumers, choices that are poorly guided by electricity rates and other incentives designed for a comparatively simpler era. These technologies also create new tools for regulated…
Market Power and Generation from Renewables: the Case of Wind in the South Australian Electricity Market
This paper examines whether outcomes in the electricity market in South Australia are consistent with theoretical analysis and market modelling that concluded that intermittent generation benefits less from market power than conventional generation. The paper finds that, based on actual outcomes in South Australia over the period from 2006 to 2011, the exercise of market…