Short term wholesale electricity market designs: A review of identified challenges and promising solutions

The electricity market is being increasingly challenged by new trends, such as the high penetration of intermittent renewables and the transformation of the consumers’ energy space. To accommodate these new trends and improve the performance of the market, several modifications to current market designs have been proposed in the literature. Given the vast variety of these proposals, and focusing on the short-term timescale within the context of European electricity markets, this paper provides a comprehensive investigation of the modifications proposed in the literature as well as a detailed assessment of their suitability for improving market performance under the continuously evolving electricity landscape. To this end, first, the barriers present in current market designs hindering the fulfilment of an efficient performance are identified. Then, the different market solutions proposed in the literature, which could potentially mitigate these barriers, are extensively explored. Finally, a taxonomy of the proposed solutions is presented, highlighting the barriers addressed by each proposal and the associated implementation challenges. The outcomes of this analysis show that even though each barrier is addressed by at least one proposed solution, no single proposal is able to address all the barriers simultaneously. In this regard, a future-proof market design must combine different elements of proposed solutions to comprehensively mitigate market barriers and overcome the identified implementation challenges. Thus, by thoroughly reviewing this rich body of literature, this paper introduces key contributions enabling the advancement of the state-of-the-art towards increasingly efficient electricity markets.