Competition in Electricity Generation in Germany and Neighbouring Countries from a System Dynamics Perspective

The European electricity industry is currently facing the transition from a monopolistic to a free market situation. One main question for incumbents as well as for new entrants is the long-term price evolution. As cost curves are not a good indicator for future price levels, the long-term price and capacity evolution have been analyzed with a system dynamics model. The model simulates the development of wholesale electricity prices and generation capacity in weekly steps for the next fifteen years under various scenarios. The market model is based on regional pool markets similar to the English or Nordic power pool. Transmission capacities as well as transmission costs are taken into consideration.