From energy legislation to investment determination: Shaping future electricity markets with different flexibility options

Modern electricity markets are characterized by an increasing share of renewable electricity generation. This growth in the share of renewables yields a highly intermittent generation structure. To efficiently integrate renewable electricity generation into our energy system, flexibility options ranging from storage facilities to demand-side management will play a major role in the low-carbon energy transformation. Keeping up with the growing demand for flexibility, energy law must reduce current investment obstacles for flexibility options and establish a climate for future investments with sufficient incentives for private investors. By taking up perspectives from different disciplines, this paper summarizes current investment barriers, presents an overview of the existing legal energy investment framework of the EU and Germany, and elaborates on challenges of the presented legislation. As we argue, a well-designed energy market legislation will be one of the keys to a successful energy transition. However, policy makers will have to (i) lower investment uncertainty for private investors, (ii) avoid a distortion of energy investment law towards specific flexibility options and technologies, and (iii) reduce the complexity of the current legislation.