The European electricity market model continues to evolve in the face of new challenges. This systematic literature review aims to assess the status of research and discussion on the current model and its market mechanisms. In addition, it aims to ascertain the kinds of modelling tools that have been used to model market mechanisms or formulate proposals for changes to current practice. The results show that the challenges of individual market mechanisms have been identified quite extensively in the research sample. However, the number of papers identified for inclusion in the systematic literature review was quite small, from which it can be concluded that there are surprisingly few publications focusing on this particular topic. Nevertheless, the trend indicates a probable increase in research in the subject area in the future. The general standpoint among researchers seems to be that the goals set by the EU are, as it were, a law of nature that cannot be deviated from. Consequently, new radical change proposals or comprehensive reforms were not encountered in the study. In addition, it was found that optimization was the most commonly used modelling method in the papers included in the literature review.

The transition toward carbon neutrality is fundamentally reshaping power systems across the globe. In Europe, the rapid growth of weather-dependent renewable generation imposes growing pressure on the European electricity market design to simultaneously deliver economic efficiency, long-term adequacy, operational reliability, and sufficiently stable investment signals. This paper analyzes the long-term capacity development in the Finnish power system applying combined system-level capacity expansion optimization and detailed wholesale market simulation. Capacity expansion is modeled using the energy market simulation software PLEXOS and formulated as a mixed-integer linear problem that minimizes the net present value of total system costs. The resulting capacity portfolios are subsequently evaluated under realistic wholesale market conditions to assess their investment viability. The results reveal a mismatch between cost-optimal and market-supported investment outcomes. Several cost-minimizing system configurations fail to recover their capital costs through market revenues, implying that systems may be less expensive to operate yet economically unattractive to build without policy support. Demand-side response is found to play a central role in mitigating peak-related system costs, and its exclusion substantially increases reserve capacity requirements that would otherwise not emerge through market signals alone. Furthermore, the analysis indicates a clear trade-off between electricity price levels and price stability: scenarios with the lowest average wholesale prices exhibit the highest price volatility. Finally, both underinvestment and excessive capacity deployment are shown to raise the levelized cost of electricity, highlighting the importance of balanced long-term capacity expansion strategies.

The transition toward carbon neutrality is fundamentally reshaping power systems across the globe. In Europe, the rapid growth of weather-dependent renewable generation imposes growing pressure on the European electricity market design to simultaneously deliver economic efficiency, long-term adequacy, operational reliability, and sufficiently stable investment signals. This paper analyzes the long-term capacity development in the Finnish power system applying combined system-level capacity expansion optimization and detailed wholesale market simulation. Capacity expansion is modeled using the energy market simulation software PLEXOS and formulated as a mixed-integer linear problem that minimizes the net present value of the total costs of the system. The resulting capacity portfolios are subsequently evaluated under realistic wholesale market conditions to assess their investment viability. The results reveal a mismatch between cost-optimal and market-supported investment outcomes. Several cost-minimizing system configurations fail to recover their capital costs through market revenues, implying that systems may be less expensive to operate yet economically unattractive to build without policy support. Demand-side response is found to play a central role in mitigating peak-related system costs, and its exclusion substantially increases reserve capacity requirements that would otherwise not emerge through market signals alone. Furthermore, the analysis indicates a clear trade-off between electricity price levels and price stability: scenarios with the lowest average wholesale prices exhibit the highest price volatility. Finally, both underinvestment and excessive capacity deployment are shown to raise the levelized cost of electricity, highlighting the importance of balanced long-term capacity expansion strategies.