The transition to renewable energy is not just about installing more solar panels and wind turbines. Without smarter market rules, the energy transition could become unnecessarily expensive and deepen inequality. That is the conclusion of new research by Dongchen He, who examined how electricity markets and subsidy policies should adapt as renewable energy becomes dominant.
"The energy transition is not only a technological shift, but also an economic revolution," says He. "If we fail to redesign the rules of the market, we risk higher energy costs and policies that mainly benefit wealthier households."
Current electricity markets fail to reward flexibility
In the past, electricity mainly came from coal and gas plants. Today, a growing share is generated by wind and solar power. But renewable electricity depends on the weather, making electricity supply far less predictable.
According to research, flexible energy sources, such as power plants or storage systems that can quickly respond when wind or solar generation drops, are becoming essential to keep the electricity system reliable. Yet current market designs do not sufficiently reward companies for providing that flexibility.
