Exploring Pan-European Electricity Markets: Segments, Coupling Mechanisms and Pricing Structures

The European electricity market has undergone significant changes driven by liberalization and the integration of Variable Renewable Energy (VRE) sources as part of the decarbonization effort. Although the current market design has successfully promoted competition and short-term efficiency, it has also revealed vulnerabilities, particularly highlighted during the recent energy crisis. This study analyses the existing market structure, emphasizing the challenges related to price volatility, investment uncertainty, and the integration of VRE. It also reviews various proposed market instruments and reforms aimed at providing more effective long-term price signals. The study concludes that while these measures hold promise, the complexity of the European electricity market necessitates a careful approach to their design and implementation to achieve a secure, low-cost, and low-carbon energy system.