ON THE POSSIBLE WAYS OUT OF THE POWER MARKET CONUNDRUM AFTER THE BIG PEAK FOR GAS IN EUROPE

Several alternatives to reform the market have been identified at the European level, among which the most relevant are the Iberian "Tope" (Pacce and Sanchez, 2022), the price cap on infra-marginal electricity sources proposed by the Italian Government (Sostegni-ter Law Decree 27/1/2022 n. 4 art.15) and by the European Commission (Regulation EU - 2022/1854), the pay-as-bid mechanism (PAB), the decoupling of the electricity market into two distinct markets (RES/NON-RES), as well as various mechanisms for ex-post extraction of infra-marginal rent. The aim of this presentation is to evaluate the potential effects of some of these proposals on price formation mechanisms by comparing System Marginal Pricing with two alternative configurations, which are Two-markets and Pay-as-bid. In addition to the three pricing options, we propose an analysis of the so-called "Tope" used in Spain and Portugal, where a maximum benchmark price has been fixed for natural gas used in thermoelectric generation. Furthermore, we add an impact simulation of the Regulation (EU) 2022/1854 for a temporary power price cap for infra-marginal generation technologies.