Position paper from ESTELA, DCSP and Protermosolar on New Electricity Market Design

• Predictability and reliability of production;
• Dispatchability due to proven and highly cost efficient thermal storage;
• Grid stability due to the inertial features of STE power blocks;
• Long-term supply security and independence from gas prices;
• High share of local content;
• No use of Critical Raw materials in the manufacturing of the mirrors.

• Increasing the pace and breadth of investment in renewable generation capacity. The European power system will require a significant amount of new renewable electricity capacity in order to meet decarbonisation targets. Given the need to decarbonize the power system in a relatively short period of time, there is a need for stronger long term investment signals. The increasing volume of low marginal cost renewable generation is creating downward pressure on wholesale prices during periods of high renewable. As a consequence, wholesale prices will become increasingly volatile – switching between periods of very low prices and very high prices, and less periods in between these two extremes. This increase in volatility will reduce generators’ ability to recover their construction costs in the current wholesale market. The regulatory framework should help to de-risk investments in dispatchable renewables and increase the access to long-term bilateral contracts such as Power Purchase Agreements (PPAs) in order to provide stability of revenue for the generators. Long-term contracts facilitate financing and reduce the cost of capital, thereby reducing the total cost of investments and benefitting the entire electricity system.
• Stimulation of investments in dispatchable renewables in order to achieve long term resource adequacy. A system dominated by cheaper, variable renewables will present a new challenge for balancing supply and demand of electricity. In order to achieve long term resource adequacy, the necessary investments in dispatchable renewables must be stimulated. In order to accommodate more variable electricity production, markets need to be improved to attract investment in the resources, like non intermittent electricity production like CSP or energy storage, that can compensate for variable electricity production. This incentivation is key to security of supply and allow a non-intermittent and synchronous production of electricity, reducing the redispatch costs and increasing market welfare. This contribution to security of supply and the increase of market welfare should be reflected in the auctions organised by each Member State. Capacity remuneration mechanisms are needed for an electricity system dominated by weather dependent generation without large scale long-duration flexibility in periods where the resources are insufficient to cover demand as short-term markets do not deliver sufficient incentives for investments in secure, reliable renewable electricity sources . Capacity mechanisms can be used to provide incentives for deployment of secure and reliable generation capacities like CSP, energy storage or Demand Response solutions. Dispatchable renewables should be eligible to participate in this capacity remuneration mechanisms.
• Maintaining system operability Alongside balancing supply and demand nationally and locally, there are a range of other challenges in managing the electricity system. System operability is achieved by the procurement of ancillary services but the system operator. Dispatchable renewables should be incentivized to participate in flexibility markets, balancing and ancillary products, even if long term contacts are in place.