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Simulating the effects of low-carbon investments in electricity markets

Project description

Simulation tools to analyse power markets

As Europe accelerates its shift to low-carbon energy sources, understanding their impact on power markets becomes crucial. The ERC-funded NextENERGEIA project will address this challenge by developing a cutting-edge analytical tool to simulate the effects of renewable energy investments, energy storage, electric vehicles, and hydrogen production on electricity markets. The tool will be used to evaluate how these investments influence market prices, emissions, and the profitability of other generation assets. It aims to guide regulators, policymakers, and energy firms in navigating the complexities of electricity markets. Testing will start with data from the Spanish market and extend across Europe, with substantial support from industry stakeholders.

Objective

NextENERGEIA plans to develop and test a proof-of-concept prototype of an analytical tool for simulating the social and private impact on power markets of low-carbon investments (renewable energies, energy storage, electric vehicles, and hydrogen production). The tool would shed light on issues central to the energy transition’s success, making it precious for regulators, policymakers, energy-intensive consumers, and energy firms. In particular, the tool would be instrumental in informing the current policy debate on the electricity market reform. The tool would build on state-of-the-art game-theoretical models developed by the PI through her ERC Consolidator Grant ELECTRIC CHALLENGES, providing the basis to simulate firms’ competitive and strategic behavior in electricity markets with large shares of renewable energies and energy storage. Those models also serve to assess the low-carbon investments’ impact on several metrics reflecting electricity market outcomes (prices, market shares, emissions, etc.) and firms’ financial profitability (pay-back period, NPV, IRR, etc.) The algorithm would be programmed in Python, and an internet-based interface would be developed for ease of use. Data from the Spanish electricity market would be used to test the tool, which would be further extended to other European power markets. Relevant stakeholders in the sector have already shown their support and willingness to participate in the training and testing stages.

The team comprises the PI (Natalia Fabra), postdocs at EnergyEcoLab (the research lab she created under her ERC grant), and software programmers who would carry out the programming activities. The team combines a deep knowledge of the power sector and the energy transition policies, a deep understanding of the relevant economic questions, and a deep command of the methods for modeling and quantifying the performance of electricity markets.

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Programme(s)

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Topic(s)

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Funding Scheme

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HORIZON-ERC-POC - HORIZON ERC Proof of Concept Grants

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Call for proposal

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(opens in new window) ERC-2023-POC

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Host institution

UNIVERSIDAD CARLOS III DE MADRID
Net EU contribution

Net EU financial contribution. The sum of money that the participant receives, deducted by the EU contribution to its linked third party. It considers the distribution of the EU financial contribution between direct beneficiaries of the project and other types of participants, like third-party participants.

€ 150 000,00
Address
CALLE MADRID 126
28903 Getafe (Madrid)
Spain

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Region
Comunidad de Madrid Comunidad de Madrid Madrid
Activity type
Higher or Secondary Education Establishments
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Total cost

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Beneficiaries (1)

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