• Energy Research

This paper examines how the likelihood of a transition to net zero could play out on the UK’s total factor productivity growth over the longer term. It does this in the context of a potential trade-off between net zero goals and productivity growth. We begin by discussing the concept of green growth and a green industrial revolution, and then relate the green economy to the circular economy, as well as GDP measurement and how this relates to productivity growth under climate policies. We use a simulation method for the projected growth under net zero of the electricity sector in Great Britain to provide a context on the consequences of increasing input growth as output growth declines, and the result shows that the 2020s are challenging decades as productivity declines by -3.24% p.a. in the electricity sector due to the combination of high input and low output growth. However, our findings reveal that the 2030s and 2040s look more promising, with productivity growth of 3% p.a. and 1.6% p.a. respectively as electrification increases and fossil fuel and labour inputs decline. Overall, the analysis offers a glimpse of just how challenging raising even maintaining the level of TFP will be in that sector in the earlier years out to 2050.

The rise of intermittent renewable energy generation, the coming mass penetration of electric vehicles and moves to decarbonise the gas grid are leading to widespread innovation experiments within electricity systems and their associated markets [...]

In this paper, we discuss electricity market design in Europe in light of the 2021-23 energy crisis, drawing on several of our Centre on Regulation in Europe (CERRE) reports. We outline the relevant theoretical background with respect to wholesale electricity markets, retail electricity markets, excess profits regulation, renewables support schemes and emergency interventions. We next outline the responses of the European Union, France, Norway, the Netherlands and Great Britain to the crisis. This allows us to make a number of recommendations about the future design of the electricity market in the light of theory and recent experience. These include a role for long-term contracts, the extension of the single market, the place for increased price granularity, appropriate energy taxation and the necessity of better monitoring of National Energy and Climate Plans to ensure adequate aggregate investment.

This paper presents a set of policy recommendations for the market design of a future European electricity system characterized by a dominant share of intermittent renewable energy supply (RES), in line with the stated targets of European governments. We discuss the market failures that need to be addressed to accommodate RES in liberalized electricity markets, review the evolution of the EU's RES policy mechanisms, and summarize the key market impacts of RES to date. We then set out economic principles for market design and use these to develop our policy recommendations. Our analysis covers the value of interconnection and market integration, electricity storage, the design of RES support mechanisms, distributed generation and network tariffs, the pricing of electricity and flexibility as well as long-term contracting and risk management.