Institutions and Electricity Systems Transition towards Decarbonization. The hidden change of the market regime

Apart from the UK where it has been widely discussed in the 2011 Electricity Market Reform, energy experts communities are still unaware of the impacts that carbon policies directly focused on the development of low carbon technologies produce on the electricity market regime. Public co-ordination with long term arrangements needs to be introduced as a substitute to long term co-ordination by the market. Indeed, the current market co-ordination makes carbon prices ineffective at orienting investors towards low carbon technologies: fossil fuel generation technologies are preferred because their investment risks are much lower in the market regime. So, in order to avoid delayed investment aiming at the decarbonization of electricity systems, a number of new market arrangements which lower the investment risk of these technologies are being selected by governments. But, as these low carbon equipments develop, long term co-ordination by the market for the other technologies (peaking units, CCGT) will fade away. That means that in the future, public co-ordination and planning will completely replace market players' decisions, not only for low carbon technologies, but for every capacity development. (authors)