Europe’s clean energy transition is imperative to combat climate change and represents an economic opportunity to become independent of fossil fuels. As such, the energy transition has become one of the most important, but also one of the most challenging economic and societal projects today. Electricity systems of the past were characterized by price-inelastic demand and only a small number of large electricity generators. The transition towards intermittent renewable energy sources changes this very paradigm. Future electricity systems will consist of many thousands of electricity generators and consumers that actively participate in markets, offering flexibility to balance variable electricity supply in markets with a high spatial and temporal resolution. These structural changes have ample consequences for market operators, generators, industrial consumers as well as prosumers. While a large body of the literature is devoted to the energy transition in engineering and the natural sciences, it has received relatively little attention in the recent business research literature, even though many of the central challenges for a successful energy transition are at the core of business research. Therefore, we provide an up-to-date overview of key questions in electricity market design and discuss how changes in electricity markets lead to new research challenges in business research disciplines such as accounting, business & information systems engineering, finance, marketing, operations management, operations research, and risk management.

This paper considers trial-offer markets where consumer preferences are modeled by a multinomial logit with social influence and position bias. The social signal for a product is given by its current market share raised to power r (or equivalently the number of purchases raised to the power of r). The paper shows that, when r is strictly between 0 and 1, and a static position assignment (e.g., a quality ranking) is used, the market converges to a unique equilibrium where the market shares depend only on product quality, not their initial appeals or the early dynamics. When r is greater than 1, the market becomes unpredictable. In many cases, the market goes to a monopoly for some product: Which product becomes a monopoly depends on the initial conditions of the market. These theoretical results are complemented by an agent-based simulation which indicates that convergence is fast when r is between 0 and 1, and that the quality ranking dominates the well-known popularity ranking in terms of market efficiency. These results shed a new light on the role of social influence which is often blamed for unpredictability, inequalities, and inefficiencies in markets. In contrast, this paper shows that, with a proper social signal and position assignment for the products, the market becomes predictable, and inequalities and inefficiencies can be controlled appropriately.

The energy transition, a process in which fossil fuels are being replaced by cleaner sources of energy, comes with many challenges. The intrinsic uncertainty associated with renewable energy sources has led to a search for complementary technologies to tackle those issues. In recent years, the use of electric vehicles (EVs) has been studied as an alternative for storage, leading to a much more complex market structure. Small participants are now willing to provide energy, helping to keep the desired balance of supply and demand. In this paper, we analyse the electricity spot market, providing a model where EVs decide to participate depending on the underlying conditions. We study pricing rules adapted from versions currently in use in electricity markets, and focus on two of them for our experimental settings: integer programming (IP) and extended locational marginal (ELM) pricing. We particularly pay attention to the properties those prices might satisfy, and numerically test them under some scenarios representing different levels of participation of EVs and an active demand side. Our results suggest that IP pricing generally derives larger individual uplift payments and further produces public prices that are not well aligned with the final payments of market participants, leading to distortions in the market.