In response to the recent energy crisis, the European Commission proposed two-way Contracts for Differences (CfDs) to secure renewable energy investments and protect consumers. The proposed CfDs, however, raised concerns regarding the potential impact on electricity prices. This study examines the effects of various CfD design elements on day-ahead electricity prices, welfare, and renewable energy production. Using a partial equilibrium model of an international electricity market including thirteen European countries, we find a trade-off between stimulating renewable electricity producers to respond to negative prices, and ensuring producer certainty. We also show potential market distortions for CfDs with longer-term reference prices, particularly when strike prices deviate from expectations. Additionally, our study underscores the interactions among various players in the electricity market, in particular storage operators and international traders, and how these interactions can mitigate potential distortions from CfDs. Therefore, policymakers should carefully consider the design elements of CfDs, and weigh the promotion of renewable energy production against the efficiency of markets. Moreover, a proper reference price should be selected, to avoid further increasing electricity prices in periods with high electricity prices.

中文翻译：

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非碳发电差价合约对电力市场效率的影响


为了应对最近的能源危机，欧盟委员会提出了双向差价合约（CfD），以确保可再生能源投资并保护消费者。然而，拟议的差价合约引发了人们对电价潜在影响的担忧。本研究探讨了各种差价合约设计元素对日前电价、福利和可再生能源生产的影响。使用包括十三个欧洲国家的国际电力市场的部分均衡模型，我们发现了刺激可再生电力生产商应对负价格和确保生产商确定性之间的权衡。我们还显示了具有长期参考价格的差价合约潜在的市场扭曲，特别是当执行价格偏离预期时。此外，我们的研究强调了电力市场中各个参与者之间的相互作用，特别是存储运营商和国际贸易商之间的相互作用，以及这些相互作用如何减轻差价合约的潜在扭曲。因此，政策制定者应仔细考虑差价合约的设计要素，并权衡可再生能源生产的促进与市场效率。另外，应选择合适的参考电价，避免在高电价时期电价进一步上涨。