Ragosa, Giulia; (2024) The political economy of wholesale power market reform and renewable energy integration: a comparison of Britain, Italy, and California. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

The need to integrate growing shares of variable renewables, like solar and wind, into the power system has sparked a new wave of wholesale electricity market reforms. Their objectives are often multifaceted: not only do emerging market designs need to leverage substantial low-carbon investments, but they must also secure the scale of short-term operational flexibility and long-term capacity needed to uphold grid reliability amid increased supply variability. While extensively explored from a techno-economic perspective, the political economy drivers and implications of these changes are frequently overlooked. Yet, power system evolution is not merely shaped by logics of techno-economic optimisation, it is also an inherently political process, rooted in specific liberalisation histories, political and institutional settings. This thesis contributes to the literature by conducting a comparative political economy analysis of recent wholesale electricity market reforms in Britain, Italy, and California. It explores how the unique technical and political economy contexts of these jurisdictions influenced their approach to reforming their power market designs between 2013 and 2021. This encompasses short-term energy markets, balancing and ancillary services, long-term capacity and low-carbon investment mechanisms. Conclusions draw on the analysis of over 300 policy documents and 53 in-depth interviews with key power system stakeholders including senior sector experts, policymakers and private sector representatives. Evidence shows that all jurisdictions introduced significant modifications in their wholesale market designs in response to changing system conditions. Notably, the energy transition is bringing a reconfiguration of the political economy of the power sector involving increased state involvement in markets, even in traditionally liberal countries. Nevertheless, variation exists in terms of the scope of reform, chosen mechanism designs, policy trade-offs, and technological outcomes. These differences stem from specific physical system realities, as well as a set of key political economy conditions, including national political priorities, historical state-market relations, national and multi-level governance arrangements, legacy market structures and key stakeholders’ interests. This has important implications for power sector governance, as discussed in this thesis.

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