Electricity Markets
Capacity mechanisms, contracts for difference, the EU electricity
market reform: the design of European power markets is being
renegotiated on many fronts at once. High wind and solar shares,
recurring price spikes, and political interventions raise the question
whether energy-only markets still set the right investment signals.
We advise ministries, regulators, grid operators, and companies on
market design, capacity mechanisms, and forward markets — through
studies, expert reports, and courses. For the German government, we have
recently worked on capacity markets, demand flexibility, and locational
price signals.
Lion Hirth is our lead on electricity markets.
Prof. Dr. Lion Hirth
hirth@neon.energy
+49 157 55 199 715
Marginal pricing
Eurelectric · 2026
Regional wholesale prices
Enercity · 2026
Price spikes
50Hertz · 2025
Cross-border forward markets
TSOs · 2024
Electricity market reform
European Parliament · 2023
Electricity market design
IEA-RETD · 2016
Electricity Markets. An in-depth overview of how electricity markets function in practice, combining economic theory, regulation, and industry experience: from price formation and day-ahead auctions to balancing and capacity markets. Designed for professionals who trade, regulate, analyze, or design electricity markets across the power sector.
Grundlagen der Energiewirtschaft. Eine kompakte Einführung in Energie- und Netzwirtschaft sowie den politisch-regulatorischen Rahmen. Der Kurs vermittelt ein grundlegendes Verständnis von Stromsystem, Marktmechanismen und Regulierung. Für Berufs- und Quereinsteiger bei Energieversorgern und Netzbetreibern sowie in Projektentwicklung und Energiepolitik.
Marginal pricing (Eurelectric). The debate about marginal pricing and the “merit order” has flared up again, with policymakers proposing wholesale interventions echoing the “Iberian Mechanism.” For the industry association Eurelectric, we produced a short study benchmarking prices against other markets, explaining marginal pricing, and debunking key merit-order misconceptions. 2026. Report.
Austrian electricity market design (multi client). The rapid transformation of the power system keeps raising new market design questions. For Austrian renewable energy associations, we ran workshops on current topics in electricity market design, such as system-friendly operation and capacity markets. 2025–26.
Price spikes (50Hertz). Episodes of extremely high power prices have raised concerns about capacity withholding. For TSO 50Hertz, we evaluated the economic causes of extreme prices, including whether plant operators withheld capacity to artificially inflate them, and developed practical recommendations to prevent future price spikes and mitigate their effects on consumers. 2025. Report.
Electricity surplus (trading house). Rapid renewables growth with insufficient curtailment raises the probability that the day-ahead market fails to clear — the case when supply exceeds demand even at −500 €/MWh. For a trading house, we developed a model forecasting the probability of such events. 2025.
EU electricity market design (BMWE). European legislation shapes electricity markets, and more change is coming. This Consentec-led project provides support and advice for Germany’s energy ministry in upcoming EU electricity market negotiations, from support schemes to grid fees and capacity mechanisms. The goal: the cornerstones of a decarbonized EU electricity market. Ongoing.
Capacity market (BMWE). After a political decision to introduce a capacity market, this multi-year project develops such a market for Germany’s economics ministry. It examines options from a hedging obligation to a central capacity market. Consentec coordinates the overall project with r2b and Öko-Institut; we lead the work on hedging obligations. 2024–26.
Cross-border forward markets (TSOs). European TSOs issue long-term transmission rights, and ACER has proposed numerous changes, including the establishment of a virtual hub. In a report for the German TSOs, we developed an analytical framework for cross-border forward markets and evaluated these proposals. 2023–24. Report.
Electricity market reform (European Parliament). The 2023 EU electricity market reform sparked debate over CfDs, PPAs, price caps, and peak shaving. Together with Bruegel, we assessed the reform proposals for the European Parliament’s ITRE committee, based on a quantitative model of contractual arrangements, and derived recommendations. 2023. Report.
Revenue cap implementation (BNetzA). Germany’s energy regulator was tasked with implementing the revenue cap on power generators. Along with Frontier Economics, we provided economic expertise. 2023.
Electricity market design (utility). The EU market design reform raised strategic questions for power producers. We supported a European utility with analytics and assessments, focusing on offshore wind topics such as CfD design and transmission access guarantees. 2022–23.
EU electricity market design (BMWK). In this multi-year project for Germany’s economics ministry, we advised on EU electricity market reform and crisis response. With Consentec, Neon co-led the consortium (with Fraunhofer ISI, r2b, SUER), headed the core market-design work package, and shaped Germany’s position on Fit-for-55 and emergency measures, opposing harmful price interventions. 2021–24.
Hirth (2013): The market value of variable renewables
Hirth & Ueckerdt (2013): Redistribution effects of energy and climate policy
Hirth (2015): The optimal share of variable renewables
Hirth et al. (2015): Integration costs revisited
Hirth et al. (2016): Why wind is not coal
Hirth (2018): What caused the drop of European electricity prices?
Blume-Werry et al. (2021): Eyes on the price: price-setting technologies
Hirth et al. (2024): Demand response to hourly wholesale prices
Stiewe et al. (2025): Cross-border cannibalization of wind & solar
Canales et al. (2026): Empirical estimate of the electricity supply curve