Electricity market design options for promoting low carbon technologies

The increasing share of electricity production from renewables is achieved by political promotion strategies like feed-in tariffs, which foresee payments for renewables outside of the electricity market. Assuming a phase out of the existing promotion strategies, the question arises if other or additional market design options for promoting low carbon technologies are necessary. In this paper, we have made an assessment based on the literature to identify possible market designs that are focusing on the promotion of low carbon technologies. The discussed options for altering the current market design range from providing greater certainty for future carbon prices, over capacity mechanisms for conventional as well as for renewable energy to a complete restructuring of the market design. The study shows that there seems to be three main tendencies to promote low carbon technologies, namely existing EOM with market add-ons for low carbon technologies, a separate market for low carbon technologies or an overall single market based on levelized costs.