Electricity Market Policies

Energy is once again dominating headlines all over the world. Gas and oil prices are volatile, key shipping routes face geopolitical pressure, and policymakers are concerned about supply risks. The renewed uncertainty is a reminder of an uncomfortable reality: the next energy crisis isn’t an if – it’s a when, and a question of how prepared we are. A defining challenge of this decade, and one that now feels more urgent than ever, is how to build a resilient energy system. One that minimises structural dependencies and is designed for rising electricity demand. The imperative of our time: The more we electrify, the less we import fossil fuels. The less we import, the more resilient we become. The course of action is clear: ▪️ Relentlessly scale renewables: Slowing the buildout will not reduce costs. Quite the opposite – delay compounds system costs for the entire economy. ▪️ Fix the grids: As fast as possible, as efficiently as possible, and at the lowest possible cost. Before they become even more of a bottleneck. ▪️ Secure 24/7 electricity supply: When the wind isn’t blowing and the sun isn’t shining, renewables need reliable backup in the form of battery storage and hydrogen-ready gas fired power plants. But gas should serve only as a backup, with renewables and batteries reducing its utilisation. ▪️ Reduce gas supply dependence with infrastructure and diversification: We must not replace old dependencies with new ones. Diversification of gas supplies is key. And the physical prerequisite is an import infrastructure with buffers. We need the planned LNG terminals, complemented by a nationally held gas reserve to help ensure secure supply in winter. ▪️ Electrify everything that makes sense: The more we can power with mostly homegrown electrons, the less dependent we become on fossil imports. Other energy import-dependent countries like Japan and China have electrification rates that are around 10 percentage points higher than Germany’s. This shows where the path forward lies. Electrification reduces reliance on imported fossil fuels, which in turn strengthens overall resilience. The time to act is now.

Most large-scale energy initiatives follow the same pattern: start with big commitments, roll out connections, figure out the policy later. Nigeria did the opposite. And that’s why it’s working. Instead of treating private investment as an afterthought, Nigeria built the policy framework first. And that made all the difference. What Nigeria Got Right - 1. A Structured Energy Compact – Nigeria created a clear, integrated policy that combines grid expansion, mini-grids, and decentralized solutions into a single plan. Other countries still treat off-grid power as an afterthought. 2. Private Sector Was Built Into the Model – Most African energy plans rely almost entirely on government spending. Nigeria understood that public money alone won’t be enough, so they de-risked the investment landscape for private players. 3. Policy Stability That Investors Can Trust – The biggest deterrent to energy investment is regulatory unpredictability. Nigeria structured clear rules around licensing, tariffs, and long-term market participation, giving businesses and investors the ability to plan long-term—not just react to political cycles. The Results Speak for Themselves - - Nigeria is now the leading mini-grid market in Africa. - Private capital is flowing into the energy sector at scale. - The policy model is structured for real expansion—not just short-term funding cycles. Now compare this to many other Mission 300 countries - - There’s no clear strategy to integrate decentralized and centralized power. - Investment risk is still too high for private capital to flow at scale. - The policy landscape remains too unstable for long-term planning. Nigeria isn’t perfect. But it’s one of the few places where energy policy is being built for growth, not just for the next round of funding. If Mission 300 countries want to make real progress, this is the playbook - - Stable, investment-friendly regulation - A clear plan that integrates all forms of power - Long-term market structures that attract capital at scale Energy access is an industry, not a one-time intervention. And Nigeria is proving that when the policy is right, the investment follows. #NigeriaEnergy #Mission300 #SmartInvestment #EnergyForGrowth

How is Germany's #Energiewende going, and how should it proceed? In our brand-new piece in Communications Earth & Environment, we show that the expansion of variable renewables has progressed substantially in recent years, but electrification and flexibility have not kept pace. We argue that German policy makers should stick to ambitious targets that will make solar and wind power the backbone of Germany’s energy future, capitalizing on recently much-improved conditions. Equally important, they should also provide firm guidance and support for heat pumps and electric cars, as opposed to hoping for alternative solutions such as e-fuels. We identify several challenges that need to be addressed in order to integrate wind and solar more efficiently and enhance resilience: ▶️ More efficient system integration of rooftop PV by aligning self-consumption incentives with system needs ▶️ Make consumption more flexible, which involves price signals, smart meters and storage ▶️ Efficiently expand transmission and distribution grids ▶️ Ensure security of supply without discriminating against flexibility technologies ▶️ Make the energy system weather resilient, which also includes long-duration storage We conclude that Germany should not slow down, but rather accelerate its energy transition to put the country on the right track towards a low-carbon future and to reap related environmental and economic benefits. Our key policy conclusions are: 1️⃣ Variable renewables are the backbone 2️⃣ Electrification requires technology clarity, not technology neutrality How does this align with current Germany energy policy? Well, the current German government seems to follow a different narrative. Instead of pushing for sustained high growth of wind and solar, there are now plans to slow down renewable expansion, hinting to the fact that electricity demand is not growing as expected. This, however, is a consequence of electrification lagging behind, which only means that less fossil fuel is substituted in the transport and heating sectors. What is worse, the notion of "technology openness" is back in the German energy policy space. Instead of putting proven and low-cost direct electrification options such as battery-electric vehicles and heat pumps in the center of the transition, there is now a lot of talk about hydrogen and e-fuels, again. In my view, this will not make the Energiewende more "pragmatic" and "realistic" as policy makers now claim - it would rather keep us from going for the lowest-cost options we have. And, as others have noted, renewables and electrification are not a German "Sonderweg", but rather an emerging global mega trend. Compare, for example, recent work by Kingsmill Bond, Michael Liebreich and many others. Our commentary and its graphs are based on constantly updated data gathered by Adeline Guéret, Alexander Roth, Felix Schmidt and me on the Open Energy Tracker, developed in the Kopernikus-Projekt Ariadne. Feedback welcome!

One thing that has been made clear from the current energy crisis: managing demand is just as critical as securing supply. The European Commission’s AccelerateEU communication, to be published on 22 April, is expected to recognize the importance of putting demand-side action and electricity market improvements firmly on the agenda. It's not just about encouraging people to reduce their daily energy use. It's about ensuring Europe's energy security and resilience by developing homegrown electricity. This requires support at national level to massively deploy available technologies - heat pumps, solar panels, EVs - to accelerate the switch to electrification of key systems like heating and transport. Likewise, reducing taxes on electricity to make it competitive and providing more incentives to grid operators to digitalize, as well as incentivize flexibility and system efficiency, has become crucial. And where energy efficiency is concerned, we already have technologies that can deliver energy (and cost) savings without compromising comfort or productivity. What matters now is execution! For governments, businesses, society… we need to take action together for Europe’s overall competitiveness and resilience. #EnergyManagement #EnergyEfficiency #Electrification #EnergyTechnology #Europe

"One of the key ways to make energy systems more reliable is by maximizing flexibility — improving how well the system can adapt in real time to changes in supply and demand. The more flexible the system, the better it can handle sudden demand spikes in the event of extreme weather, such as cold snaps or heat waves, or respond to supply disruptions such as plant outages. Improving flexibility includes upgrading aging infrastructure. Much of the U.S. grid was built decades ago under different demand patterns. Modernizing the grid — by updating substations and transmission equipment, deploying advanced sensors and incorporating advanced transmission technologies (ATTs), for example — can reduce failure rates during extreme heat and cold. These technologies help operators detect problems quicker, reroute power if equipment is damaged and restore service fast. Modernization not only improves reliability but also reduces expensive emergency interventions and lowers long-term maintenance costs. Increasing grid capacity, both through deployment of ATTs and building regional and interregional transmission lines, can reduce the risk of a local weather event turning into a widespread outage. Creating a more interconnected grid allows regions to share power during shortages. Having this greater transmission capacity also help keep prices down by allowing lower-cost electricity to reach areas facing higher demand. Demand-side management options can help ease pressure on the system during extreme weather events. These include encouraging customers and large users to reduce or shift electricity use during peak periods in exchange for lower bills or leveraging distributed energy resources to help prevent shortages. Systems that rely too much on a single fuel are more vulnerable to disruption. Diversification across energy sources and technologies helps reduce the risk of issues related to fuel shortages, infrastructure failures and localized weather impacts. Finally, policy is also critical. It’s vital that incentives are properly aligned with modern needs for flexibility and preparedness. This can help utilities make system investments that really work in extreme weather and minimize costs to consumers in both the short and the long run." Kelly Lefler World Resources Institute https://lnkd.in/e5syqXQp

Snippet: Australia’s Renewable Energy Challenge: Curtailment and Opportunity Australia is rapidly shifting to renewable energy, but curtailment - spilling wind and solar power due to grid limitations - remains a challenge. In his article [1], Daniel Mercer of ABC News examines this issue and its implications for our energy future Key Takeaways: 1. Grid Infrastructure and Curtailment: Australia’s renewable energy grid is expanding rapidly, but without sufficient infrastructure upgrades, a significant portion of this clean energy is being wasted. Investing in modernisation could reduce curtailment and unlock the full potential of renewables. 2. Coal Plants as a Barrier: Coal plants, due to their inflexible design, continue to limit renewable energy integration. As these plants retire, renewables will have more room to grow, though careful management is needed to ensure a stable transition. 3. Rooftop PV’s Role in Curtailment: While coal plants' minimum operational levels limit the grid's capacity for renewables, rooftop solar PV increases curtailment by reducing operational demand during peak generation. This growing impact underscores the need for better grid management and energy storage solutions. 4. Energy Storage as a Key Solution: Storage solutions like large-scale to EV's and household batteries are essential to shifting surplus renewable energy to periods of high demand. This will improve renewable efficiency and help balance energy supply. 5. Economic Opportunities for Consumers: Curtailment presents opportunities for consumers to save on energy costs by adjusting their usage. Flexible consumption models could support grid stability and maximise economic benefits. 6. Market Reform for Renewable Growth: Australia’s energy market needs to adapt to the variability of renewables. Strategic market reforms could stabilise pricing, support renewable integration, incentivise the adoption of storage technologies and flexible loads. 7. System Design Challenges in Decarbonisation: Curtailment reveals the need for smarter grid management as Australia moves towards decarbonisation. Addressing these system design challenges could accelerate the country’s transition to a low-carbon future. 8. Aligning Climate Goals with Energy Efficiency: Reducing renewable energy waste through curtailment aligns directly with Australia’s long-term climate goals. Prioritising storage and grid improvements will strengthen the country’s sustainability efforts.    Curtailment poses challenges but also opportunities for Australia’s renewable sector. With investment in infrastructure, storage, market reforms, and flexible loads, the nation can better harness its renewable potential and meet its climate goals. References: 1. Australia 'wasting' record amounts of renewable energy as share of wind and solar soars by Daniel Mercer (Sat 06 Sep 2024) .. https://lnkd.in/g8-DmV-X

I was honored to join Axios energy reporter Ben Geman at the Atlantic Council in Washington, DC, for a fireside chat to discuss what it will take to power an economy that’s more electrified, resilient and competitive. The reality is stark: demand for electricity is projected to grow far faster than overall energy use. This is no threat to prosperity; it’s an opportunity - if we act with realism and speed. I have three takeaways from our discussion, and they are based on one simple insight: a successful energy transition needs energy security. We need to put the technologies and infrastructure in place to ensure we have the right energy, at the right time, at the right price. We can achieve this if we: 1. Squeeze more from every kilowatt: Energy efficiency and grid modernization are just as important as energy supply. We can quickly improve energy efficiency in industries and buildings by using high-efficiency motors with variable-speed drives. If widely adopted, this could reduce electricity demand by about 10% - the same as the output from around 100 coal plants or 35 nuclear plants. These savings could meet the growing energy needs of data centers for several years. 2. Modernize and digitalize the grid: We are still trying to run a 21st century economy on 20th century infrastructure. By 2040, the world needs 80 million kilometers (almost 50 million miles) of grid upgrades, plus storage and digital control, to integrate variable renewables, balance peaks, and improve resilience. Permitting is now a critical bottleneck. This is where targeted policy – with smarter approvals, clear standards, and investment in distribution networks – can unlock real capacity quickly. 3. Make AI part of the solution: There are a lot of headlines that Artificial Intelligence is driving up demand for energy. However, AI-enabled energy management – with digital substations and edge control – can also optimize usage, reduce losses and prevent outages. We have to see AI as a crucial tool to manage grids, to forecast, shift and reduce demand. AI can help us align demand growth with grid reliability. None of this scales without people. Resilient energy systems need a skilled workforce, from electricians to data scientists. Upskilling, retraining, and apprenticeships have to be made a priority by both the public and the private sector. The path forward is clear: electrify everything you can; deploy efficiency first; digitalize the grid; and use AI to manage what we add (and have). For regions and countries that do this, energy security will be a competitive advantage creating the foundations for sustainable growth. Listen to the full discussion here: https://lnkd.in/emMu-4zr

𝗣𝗮𝘁𝗵𝘄𝗮𝘆𝘀 𝘁𝗼𝘄𝗮𝗿𝗱𝘀 𝗹𝗼𝗰𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝗶𝗻 𝗘𝘂𝗿𝗼𝗽𝗲 In a new Energy Policy publication with Franziska Klaucke, Luis Olmos Camacho; Lisa Ryan, Silvia L. Vitiello, Anthony Papavasiliou and Konstantin Staschus we characterize and discuss pathways towards locational pricing and discuss associated challenges and opportunities. 𝗕𝗮𝗰𝗸𝗴𝗿𝗼𝘂𝗻𝗱: • The expansion of wind and solar electricity generation and increasing electrification are placing considerable strain on transmission capacities. To meet this challenge, an effective use of demand-side flexibility is essential. • However, in the current market design, demand-side flexibility responds to price signals in one large zone rather than local needs. This may exacerbate rather than reduce congestion. More local price signals are therefore required. 𝗢𝗽𝘁𝗶𝗼𝗻 𝟏: 𝗥𝗲𝗰𝗼𝗻𝗳𝗶𝗴𝘂𝗿𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝘁𝗵𝗲 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝘇𝗼𝗻𝗲𝘀 Making pricing zones smaller is widely discussed. If the zone remains too big, congestion is only partially addressed. If the zone is too small, liquidity and local market power are an issue. The bidding zone review showed that it is impossible to satisfy both objectives. 𝗢𝗽𝘁𝗶𝗼𝗻 𝟐: 𝗣𝗮𝗿𝗮𝗹𝗹𝗲𝗹 𝘀𝗵𝗶𝗳𝘁 𝘁𝗼 𝗻𝗼𝗱𝗮𝗹 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝗮𝗰𝗿𝗼𝘀𝘀 𝗘𝘂𝗿𝗼𝗽𝗲 Nodal pricing secures the benefits of large market regions including liquidity and competition. A step wise reform could involve a shift from physical to financial balancing groups, from complex bids to multi-part bidding, to auctions closer to real time and integration of energy and balancing markets. The consensus required across the EU for each of these steps, however, could cause severe delays. 𝗢𝗽𝘁𝗶𝗼𝗻 𝟑: 𝗦𝗵𝗶𝗳𝘁 𝘁𝗼 𝗻𝗼𝗱𝗮𝗹 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝗯𝗮𝘀𝗲𝗱 𝗶𝗻 𝗽𝗶𝗹𝗼𝘁 𝗿𝗲𝗴𝗶𝗼𝗻𝘀 Successful transitions to nodal pricing in North America were pursued region by region. Also EU countries could be allowed to move autonomously to nodal pricing. The challenge is how to familiarize stakeholders in the pilot countries with the approach. EU experience shows that other countries can then more easily follow. A clear definition of the reform objective is essential for all pathways: First, facilitating a secure and economically efficient operation of the power system with demand side flexibility. Second, local price risks have to be addressed to ensure investments security for industry and households.

💡 Can you guess where this wind power integration is? France or Vietnam? Technically, electricity flows are governed by the same physics everywhere. But the policies that enable grids to modernise in time and ensure flexible electrification to develop differ because of political and economic contexts. A few weeks ago, I shared that Agora Energiewende and Regulatory Assistance Project (RAP) started to work on a toolkit to navigate policies for Grid Modernisation for Flexible Electrification. Early in our inception phase, one finding keeps emerging: *priority policies differ significantly by country*. Here's what we're seeing: 👴 Mature grids: Countries are adapting their regulatory frameworks to enable flexibility, storage, and demand response. France's TURPE 7 tariff reform introduces time-of-use grid charges that reward storage for supporting the grid at critical times Energy-Storage, while the UK's RIIO (Revenue = Incentives + Innovation + Outputs) framework links network company revenues to performance on flexibility and innovation targets. 🏗️ Building new grid capacity: The opportunity is "building smart from the start." Vietnam's revised PDP8 emphasizes smart grid systems to safely integrate large-scale renewables, while Kenya's Renewable Energy Integration programme adopts enabling technologies with battery storage to capture surplus energy. 📈 Rapid electrification: India's National Smart Grid Mission pilots test smart metering and distributed generation to support rapid demand growth while managing reliability challenges. 🧭 This is why we're building a tool that navigates these nuances - adapting to your power system context rather than offering generic prescriptions. Policymakers can filter by country characteristics and get tailored recommendations with implementation roadmaps. 💬 What policy priorities are you seeing in your region? The conversation shapes our work. #GridModernisation #EnergyPolicy #PowerGrid #EnergyTransition #CleanEnergy #Infrastructure