A simulation model for the European Electricity Market including long-term instruments: Contract for Differences, Power Purchase Agreements and Forward Market

This thesis presents a study on the ongoing European Commission’s Elec- tricity Market Design Reform proposal. This initiative seeks to establish a collaborative, cross-border framework for the exchange of electricity, to maximize the energy efficiency of both short-term and long-term economic dispatch, while promoting security of supply. Its origins and developments are discussed, and then the Electricity Market mechanism and instruments are described. The main part of the work is a simulation model for the market to obtain some values, among which are the energy prices in the wholesale day-ahead market. The market’s functioning and the crisis’s impact on consumers and generators are assessed. The focus is on long-term instruments such as Con- tract for Differences (CfDs), Power Purchase Agreements (PPAs) and For- ward Markets (FM), the same pointed out by the European Commission. The aim is to demonstrate the market’s need for reform, particularly in its long-term component, assess the financial impact of signing long-term instruments and compare the results related to the three analyzed long-term contracting instruments. The actual market lacks this and according to the reform, the solution sits in the long-term contracts cited above. Then comes the second part of the thesis, an analysis of a future scenario is conducted, in Spain in 2030. The same optimisation model is run with new considerations on the generator’s availability and capacity and contract prices. The scope is to study the impact of having signed or not contracts ahead of time and the consequences of it. Then they are compared with the Spain 2022 scenario. Finally, techno-economic considerations are drawn.