Why the sustainable provision of low-carbon electricity needs hybrid markets

Deep decarbonization of energy systems poses considerable challenges to electricity markets and there is a growing consensus that an energy-only design based on short-term marginal cost pricing cannot deliver adequate levels investment long-term coordination across actors sectors. Based the instructive example evolution European market designs, we discuss several shortcomings illustrate how ad-hoc policies intend address them have limitations their own, notably lack systemwide coordination. Second, describe sheer scale nature deep targets requiring massive in capital-intensive low-carbon technologies exacerbate these issues. Ambitious emission reduction thus require towards hybrid regimes. Hybrid separate decisions from operations through balanced differentiated use competitive regulatory elements coordinate de-risk investment. Finally, historical analysis different designs shows constitute contemporary forms long-run are appropriate for meeting with reduced uncertainty hence lower private social costs.