A cap on market revenues for inframarginal electricity generation technologies in the EU - an essential electricity market intervention or an unsolicited strain on the renewable energy industry? : The role of energy transition in increasing security of supply and an empirical analysis of the effects of the regulatory approach on the renewable sector

Due to recent price volatility in the EU electricity markets, exceptional intervention measures have been implemented to ease the increased pressure on European households and businesses. This thesis examines the measure of setting a cap on market revenues for inframarginal energy generators. The thesis is divided into three sections. The first part of this research highlights the main elements of the EU’s energy policy objectives, attempts to trace back to the causes of the energy crisis, and examines how the current electricity market design contributes to attaining these goals. The second part deals with the content of the temporary regulatory measure that sets a cap on market revenues and attempts to identify some of its key costs and benefits. Finally, the third section takes a more pragmatic approach aiming to determine the risks adopting such regulatory measures may impose on the renewable energy industry by drawing from empirical data acquired from industry operators via survey responses. Combining these three parts of research, this thesis seeks to first determine and introduce the causes of the current electricity market crisis as well as the aspects of the current electricity market design that may be considered to malfunction. The second research question deals with the content of the regulatory measures adopted to mitigate this crisis in electricity markets attempting to conclude whether this measure can be considered an effective intervention. Along with the aims of the first and second parts, this thesis also attempts to assess the potential risks such regulation may have on the future of the renewable industry, forming the third research question answered through empiricism: how could this temporary measure affect the generators of renewable energy in the long-term? Besides providing a brief overview on the current EU electricity market design, this thesis aims to establish the importance of transitioning to renewable energy and increasing its role in the EU energy mix to not only be vital for ...