The European Union and its Member States are seeking to decarbonize their energy systems, including the electricity sector and, at the same time, pursue market integration. However, renewable energy (RE) deployment and the liberalization of the energy-only market have raised concerns at the national level about the security of electricity supplies in the future. Some actors consider the lack of sufficient investments in generation capacities a threat to supply security. As a consequence, it was proposed that capacity markets solve these problems. The underlying assumption is that the market design is the only determining factor for investments in security of supply options. In this article, we question this narrow view and identify further determinants of the investment decisions of electricity market participants. Based on the insights of institutional sociology and economics, we understand the market to be a social institution that structures the behavioural expectations of market participants. Derived from the theoretical conceptualization and based on qualitative literature review and own work, we find four determinants for investment behaviour beyond the formal market design: Material opportunities, strategic actor behavior and identity, focusing events and discursive expectations about the future. With this perspective, we discuss the introduction of a European Energy Union as a possible tool that might have a great impact on the more informal determinants such as expectations about the future and the construction of a European energy narrative.

The guidelines for Trans-European Energy Network planning foresee the application of a neutral pan-European transmission cost–benefit analysis (CBA) to facilitate the optimal expansion of the electricity transmission system. This CBA is to provide neutral cost–benefit information for the identification of the most profitable transmission projects and to help reduce public opposition by showing the objective costs and benefits of new projects. We review and discuss a wide range of literature related to the ontological, epistemological and economic theory foundations of CBA. Our analysis shows that the results of a CBA are based on several value-judgements linked to the standpoint of the analyst; the non-comparability of interpersonal utility; flawed data from willingness-to-pay/willingness-to-accept methods; the arbitrariness of social discount rates; and the status-quo bias of the Pareto efficiency and Kaldor–Hicks principles. Therefore, a pan-European transmission CBA cannot generate neutral information and will fail its core objective of providing unbiased information. The way it is designed, the CBA obscures different stakeholder perspectives and is biased towards a particular set of values. Hence, we expect it to increase, rather than to reduce, public opposition to power lines in Europe. We propose a participatory approach to alleviate some of the problems of the pan-European CBA.

Ausgangspunkt für Forderungen nach einer Einführung von Kapazitätsmechanismen im deutschen Strommarkt ist die Beobachtung, dass das gegenwärtige Investitionsverhalten der Marktakteure zu einem unzureichenden Niveau der Stromversorgungssicherheit führen könnte. In dem vorliegenden Beitrag wird die enge logische Verknüpfung zwischen Investitionstätigkeit und einer Änderung des formellen Marktdesigns hinterfragt und eine erweiterte Perspektive für die Interpretation des gegenwärtigen Marktergebnisses erarbeitet. Den theoretischen Rahmen dafür bieten die Institutionenökonomie und die Neue Wirtschaftssoziologie. Neben dem Strommarktdesign werden als weitere Einflussfaktoren auf das Verhalten der Marktakteure die materiellen Opportunitäten im Inland und in gekoppelten Strommärkten, die Erwartungen über künftige Marktentwicklungen und das strategische Verhalten der Marktakteure identifiziert. Unsere Analyse zeigt, dass Investitionen in flexible Kapazitäten durchaus auch innerhalb des bestehenden Marktdesigns bei einer Veränderung der materiellen, finanziellen und/oder institutionellen Opportunitäten und Erwartungen angestoßen werden könnten. Summary The fear that the current market design could lead to underinvestment in flexible capacity in the German power market is often countered with proposals for capacity markets to ensure the security of future electricity supply. This article challenges this narrow view of an unambiguous logical connection between a reformation of the power market design and a change in investment behavior and develops a broader perspective for the interpretation of the current market outcome. We create a theoretical framework based on insights from institutional economics and the new economic sociology. We find that in addition to the formal market design, the material opportunities, the coupling of the electricity sector with related systems, expectations about the future market development, and strategic actor behavior may have an influence on the investment decisions in the power market. The analysis indicates that investment in flexible capacity can be possible even within the current market design, if the material, financial, and/or institutional opportunities and expectations change. JEL Classification: B52, D40, D83, P48

The core objectives of the United Nations Framework Convention on Climate Change (UNFCCC) are to stabilize greenhouse gas concentrations to non-dangerous levels quickly enough to allow ecosystems to adapt naturally, while not threatening food production or sustainable economic development. The approach embedded in the Kyoto Protocol, reflecting the concept of common but differentiated responsibilities, has been to start by setting binding emissions targets for industrialized countries, while using carbon markets to mobilize international finance for mitigation efforts in developing countries. The critical challenges for negotiators since then, however, have been in agreeing when the time is right to move towards binding emissions targets for developing countries and what level of financial assistance from developed countries is appropriate and politically feasible, given the well-founded perception that such targets, if sufficiently stringent to limit climate change and unaccompanied by strong financial assistance, could in fact hinder many countries. immediate economic development.