Energy Markets of Today

Energy markets are governed by the laws of economics. Generators and consumers interact to shape the transactions in the energy markets, and thus the energy system. But how does the 'invisible hand' of economics show up in practice? What determines electricity prices and why are they always changing? Why is it so difficult to encourage investment in electricity generation?

This course will help you understand the functioning of energy markets as the necessary first step to promotion of the energy transition. By using the European electricity market as an example, you will obtain a deeper understanding of its principles and effectiveness.

You will investigate four main areas:

• the basics of the energy markets;
• the operation and design of those markets;
• how policy makers can promote investment in electricity generation;
• how the electricity network operates and how network tariffs are determined.

Insightful videos will explain the driving factors behind energy markets. Interactive assessments will demonstrate how the merit order is chosen for different types of markets and how this determines the market price. Live practice sessions will take you through the auctions and marketplaces where electricity trading takes place today, giving you invaluable knowledge on the inner workings of these markets and the effects of network capacity.

Whether you are interested in learning about how the merit order in energy markets works or how the European electricity market is organized; or interested in understanding the economics behind electricity consumption, examining the economic problems of incorporating renewable energy sources into the current system; or simply want to become informed about what makes the energy markets tick -this is the course for you.

This course will address all of these questions and more. Upon completion of the course, you will be able to take on questions, problems or challenges thrown at you about the nature of energy markets and their operation.

This course is the first course in the program: The Economics of the Energy Transition. This program aims to help strategic decision makers, economists, policy advisors and regulators as well as practicing and future engineers to obtain a deeper understanding of the topic. Its aim is to increase your understanding of energy markets, the current European electricity market and to be able to promote the investments necessary for achieving the energy transition.

Week 1: Key elements of energy markets
An introduction to the basics of energy markets, the main players and how market organization, regulation and liberalization affect the energy market.

Week 2: Different types of market models and what effects the energy market
The different models for energy market structure are described and the importance of time and geographical dependence as they affect energy markets.

Week 3: The economics of generation investment and capacity mechanisms
An introduction to the problems that occur with investment in energy generation and potential solutions in both the current energy system and renewable-energy-based systems.

Week 4: Energy Networks and congestion management
The energy network and how it recovers its costs in the EU as well as looking at congestion management across borders.

Week 5: Case review