Long-term issues with the Energy-Only Market design in the context of deep decarbonization
研究了纯能量市场在深度脱碳背景下的长期效率问题，发现放松理论假设会导致电价上升、供应安全下降和脱碳延迟，并揭示了低碳资产投资与化石资产退出的动态协调问题。
There has been fierce controversy in the literature over the long-run efficiency of the energy-only market (EOM) design ever since its inception. In this paper, we provide novel insights to illuminate this historical controversy, and we revisit it with a focus on contemporary issues and the profound changes brought about by the energy transition. Specifically, we develop an analytical and modeling framework to quantitatively investigate how EOM outcomes hinge on the underlying behavioral, informational and structural assumptions. We apply our framework to a case study calibrated on Californian fundamentals that captures the key features of energy systems under deep decarbonization. We characterize how EOM outcomes can substantially deviate from the long-run optimum as soon as one assumption is relaxed compared to theoretical requirements. This leads to pathways with higher electricity prices, lower security of supply and delayed decarbonization. In particular, we highlight how market price signals alone are prone to a dynamic entry-exit coordination problem between investment in low-carbon assets and the phaseout of fossil-fired assets. This calls for a market design reform to complement price signals that accounts for realistic assumptions.