Electricity markets and the prices that emerge from trading on these markets drive the energy transition. It is traders, rather than power plant engineers, who decide which power station is dispatched. It is the prices that provide the incentives for investment and innovation and they drive out (or not) polluting generators. It is the market that will ultimately determine if new energy technologies thrive or dive. But robust electricity market design is not only foundational for the energy transition, it is also foundational for energy poverty and for security of supply: in other industries, perverse incentives cause waste of resources, in electricity markets they can cause large-scale blackouts. Electricity market design is complicated, but too important to be left poorly understood. The executive course Electricity Markets is an introduction to economics, regulation, and industry practice of power markets.

After reviewing economic models of price setting in electricity markets (Merit Order Model and Screening Curve Model) and price drivers (fuel and carbon markets, weather), we will study short-term electricity markets that drive plant dispatch: spot markets, imbalance settlement and balancing reserve auctions. In the second half of the course, we will study the long-term investment incentives: financial markets and capacity mechanism. We will also discuss alternative ways to give electricity markets spatial granularity (zonal pricing, nodal pricing) and study retail markets. While this course is centered around European markets, in the last session we will contrast this to US market design.

The executive course will take place on the Hertie School’s campus in the heart of Berlin. See what you can expect over the two days. In brackets, you will find the readings for the course.