The energy-only market (EOM) is a trading model in the electricity market that is based on the idea that the prices for electrical energy are determined exclusively by the interplay of supply and demand. Unlike in regulated markets, where state intervention and price controls are common, market forces are supposed to work freely on an EOM to find the optimum price for electricity. This model has become increasingly important in recent years, particularly in the debate on the integration of renewable energies and the creation of a sustainable electricity market.

In Europe, and particularly in Austria, the energy-only market is seen as a potential approach to encourage investment in flexible and renewable energy. The idea is that rising electricity prices in times of high demand or low generation will incentivise investment in new capacity. This flexibility is particularly important as electricity generation from renewable sources such as wind and solar can fluctuate significantly.

In an EOM, there is no guaranteed revenue for electricity producers, which means that the profitability of power plants is highly dependent on market prices. While this can be an advantage for new, flexible generation plants that can react quickly to changes in electricity demand, it poses a challenge for older, less flexible power plants. In Austria, a significant proportion of electricity generation is still dependent on fossil fuels, which can lead to challenges in terms of profitability in an energy-only market.

One example of the EOM is the market in the UK, which has been based on such a model since liberalisation in the 1990s. There it has been shown that the EOM has incentivised investment in gas-fired power plants that are able to react quickly and thus compensate for fluctuations in renewable energies. Austria could learn from this experience in order to optimise its own market structures.

The discussion about the energy-only market in Austria and Europe is also being shaped by the requirements for decarbonisation and climate targets. An EOM could help to shape market conditions in such a way that they promote the integration of renewable energies and at the same time guarantee security of supply. However, it is also important to take measures to ensure that all market participants are treated fairly and that adequate security of supply is guaranteed.

A critical point in the debate about the EOM is the role of storage technologies. In order to compensate for fluctuations in electricity production from renewable energies, innovative storage solutions are required that are capable of storing energy and releasing it when needed. Technologies such as batteries, pumped storage power plants and other energy storage systems could play an important role in an EOM to increase grid stability and flexibility.

To summarise, the energy-only market is a promising model for the future development of the electricity market in Austria and Europe. By incentivising investment in flexible and renewable energy sources, this market approach could help to meet the challenges of the energy transition and ensure a sustainable, competitive energy supply. The exact implementation and the associated framework conditions will be crucial to ensure the success of such a model and to achieve the climate targets.