Price makers in 100 % renewable power systems: shadow price formation through flexibility options, hydropower, and congestion in a multi-zonal model

The transition toward highly renewable energy systems requires large-scale deployment of new generation capacities while maintaining system reliability and economic efficiency. Since renewable resources are geographically unevenly distributed, cross-border electricity exchange and flexibility options gain in importance for balancing supply and demand. This research analyses the interaction between renewable generation deployment, cross-border electricity flows, and electricity price formation in interconnected energy systems. The analysis is performed using the Highway to Renewable Energy System model, which was expanded with a multizonal capability for this research. The analysed region comprises the interconnected systems of Croatia, Slovenia, and Bosnia and Herzegovina. The results show that decarbonization is primarily achieved through large-scale deployment of variable renewable generation. By 2050, total wind and solar capacity increases 11,23-fold compared with 2025 values. Specifically, solar and wind capacities increase 13,3-fold and 6,7-fold, respectively. Shadow-price analysis of the electricity-balance constraint indicates a structural shift in price formation. Thermal power plants dominate marginal pricing in the early years, whereas flexibility technologies and cross-border electricity exchanges increasingly determine prices in later periods. In some systems, dammed hydropower also becomes a price-setting technology by reflecting the opportunity cost of not generating during periods with higher electricity prices. The increasing share of renewable generation also leads to zero or negative price hours with approximately 17 % of annual hours in some systems. Average electricity prices decline to about 20 EUR/MWh by 2050. These findings highlight the growing importance of flexibility technologies, storage, and cross-border balancing mechanisms in highly renewable and interconnected electricity systems.