STORM

With the electricity market model STORM (Simulated Trading & Oligopoly Response in electricity Markets), the EWI represents price formation in the European electricity system. In doing so, a competition of the large generation companies is assumed as Cournot competition with a competitive fringe, which meets an elastic demand and is linked to the transmission grid via Flow-Based Market Coupling.

In addition to a realistic modeling of spot prices, the approach also makes it possible to quantify how demand, welfare, and emissions can change in the economic equilibrium due to regulatory interventions. One example is the examination of the extent to which bidding zone splits can change the market power potential of established generators.

STORM for Consulting and Research

The model generates realistic price forecasts for the day-ahead market. It also makes market power risks visible before regulatory course is set, and thus provides a robust basis for decisions on market design and competition supervision. STORM can be adapted to different target years, market participants, and regulatory scenarios.

STORM in Practice:

• Generation of realistic price time series for scenario analyses: derive the probable electricity prices for the scenarios examined
• Quantification of market power: ex-ante estimation of the market power potential of established generators for the future German electricity market
• Impact assessment of bidding zone splits: analyze the effect of a split of the German bidding zone on price mark-ups, zonal price spreads, and market concentration
• Welfare and distribution effects: determine the redistribution between consumer and producer surplus as well as the welfare loss due to market power
• Emission effects: derive the effects of strategic behavior on the CO₂ emissions of the electricity system
• Assessment of competition and grid conditions: examine how the expansion of renewable energies and flexibilities as well as grid expansion reduce the market power potential of dominant generators

STORM in Detail

Unlike a pure cost-minimization model, STORM explicitly represents strategic behavior and demand responses. The model formulates the market equilibrium of an oligopolistic electricity system: The established German generators act as strategic Cournot actors, while the remaining domestic capacities and the foreign market areas form the competitive fringe. A parameter thereby controls how strongly each company exploits its market power potential, calibrated to a competitive reference case.

STORM restricts trade between the market areas via the restrictions of Flow-Based Market Coupling as well as via trade capacities for interconnectors not participating in it. Storage is represented with charging and discharging as well as state-of-charge conditions, so that their strategic influence on price formation also becomes visible.

Schematic Representation of the Model

STORM connects the economic market level with the physical grid restrictions: from a competitive reference case, the model first derives the market power potential of the strategic actors, then solves the market equilibrium and evaluates zonal prices, market power, trade flows, welfare, and emissions.

The central input data currently refer to the target year 2030. German demand is assumed to be 667 TWh, the conventional power plant fleet is based on the power plant list of the Federal Network Agency (Bundesnetzagentur, BNetzA), the grid data come from the SPIDER framework, and the assumptions for the foreign market areas are based on the Ten-Year Network Development Plan (TYNDP) 2024.