  Climate and energy policy targets of the European Commission aim to make
Europe the first climate-neutral continent by 2050. For low-carbon and
net-neutral energy systems primarily based on variable renewable power
generation, issues related to the market integration, cannibalisation of
revenues, and cost recovery of wind and solar photovoltaics have become major
concerns. The traditional discussion of the merit-order effect expects
wholesale power prices in a system with 100 % renewable energy sources to
alternate between very high and very low values. Unlike previous work, we
present a structured and technology-specific analysis of the cross-sectoral
demand bidding effect for the price formation in low-carbon power markets.
Starting from a stylised market arrangement and by successively augmenting it
with all relevant technologies, we construct and quantify the cross-sectoral
demand bidding effects in future European power markets with the cross-sectoral
market modelling framework SCOPE SD. As the main contribution, we explain and
substantiate the market clearing effects of new market participants in detail.
Hereby, we put a special focus on hybrid heat supply systems consisting of
combined heat and power plant, fuel boiler, thermal storage and electrical back
up and derive the opportunity costs of these systems. Furthermore, we show the
effects of cross-border integration for a large-scale European net-neutral
energy scenario. Finally, the detailed information on market clearing effects
allows us to evaluate the resulting revenues of all major technology categories
on future electricity markets.

General Economics;Economics