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Market design and auctions
The introduction and refinement of competition in elements of the energy value chain continues to be a major policy theme not only in Europe but throughout the world. At the same time, international experience of what works and what doesn't continues to develop.
In designing effective, competitive markets, policymakers and regulators need a clear understanding of the incentives which are required for effective competition, and the market structures and mechanisms that are most likely to deliver them.
Set piece auctions have become an increasingly important part of the energy scene in recent years, for electricity and gas as commodities, as well as for emissions permits and for transportation rights.
Given the scale of cashflow typically involved, effective auction design can have a significant impact on value. Similarly, the design of the products to be sold and the arrangements around the auction (e.g. nomination rights and use it or lose it conditions) can have a big impact on the realisation of the auction objectives.
We use our understanding of competition, combined with knowledge of the specific features of energy markets and hands-on experience of market and auction implementation to ensure that competitive processes are designed and implemented to meet our clients' objectives.
Examples of our work include:
- EDF, for which we provided advice on its Virtual Power Plant (VPP) programme, a series of auctions releasing 6000 MW (now 5400 MW) of capacity;
- CREG, the Belgian energy regulator, on the design of an auction of VPPs to address issues of market dominance in the Belgian wholesale electricity market;
- E-Control, the Austrian energy regulator, on the auction arrangements for gas release by Econgas;
- Government of Brazil, on the reverse auctionin which retailers acquire electricity (so called 'old energy') from existing plants to supply regulated customers;
- European Commission DG ENER (formerly DG TREN), on the use of auctions to allocate capacity on electricity interconnectors;
- National Grid, on the design of gas transmission entry capacity auctions;
- National Grid, on the design of arrangements for access to the Anglo-French interconnector;
- EFET Deutschland, on network access rules for the German gas market;
- Endesa, on issues related to the Spanish VPP auctions;
- Government of Austria, on the design of competitive arrangements for the wholesale markets in gas and electricity; and
- Senoko Power, Singapore, on the design of competitive arrangements for the local wholesale gas market.
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