Global Market Design Taxonomy | Future of Power Systems

Global mechanism inventory

Mechanisms carry different names across jurisdictions and serve overlapping purposes. Without a common framework, policy-makers cannot reliably compare approaches, assess trade-offs, or identify gaps in their own design.

This inventory maps more than 50 mechanisms across the four service categories, illustrated with more than 85 real-world examples spanning the EU/EEA, the US, the UK, Australia, Japan, China, India, Latin America, Southeast Asia, and Africa. Mechanism names are anchored to EU legal vocabulary where applicable.

Every power system faces the same physical requirements.

What this taxonomy is

This taxonomy is a structured inventory of the mechanisms through which power systems pay for, or require, the services that keep them running.

Every system must meet four requirements: resource adequacy, energy, system ancillary services, and flexibility services. Within each, the requirement is secured in different ways, procured through a market in some systems and required through an obligation in others. This taxonomy organises those mechanisms not by jurisdiction or name, but by the service they procure. The mechanisms mapped here are the different ways systems around the world meet these requirements.

A reader can use it diagnostically. Start from a requirement the system must meet, find the mechanisms available for securing it, and identify which are already in place. Each mechanism links to a jurisdiction that operates it and to the primary source establishing it, so a system considering an option can see how it has been implemented elsewhere, read the rules that govern it, and judge whether it would work in its own context.

What this is not

Not a recommendation or a comparison

The inventory does not rank market designs or judge one mechanism against another. Two systems can meet the same physical need through different mechanisms, and which fits depends on the resource mix, network topology, institutional capacity and policy objectives of the system in question.

Not a regulatory framework

It proposes no rules, model legislation or licence conditions.

Not a complete map of any system

Where a service is required through grid codes rather than procured, the inventory records the obligation but not the technical standards behind it.

Not exhaustive

The inventory captures the main mechanism types in use and illustrates each with verified examples. It does not record every mechanism operating worldwide, or every instance of those it does record.

The taxonomy has four tiers. Start from a requirement the system must meet, narrow to how it is secured, find the mechanisms available for securing it, and follow an example to the jurisdiction that operates it.

Service category

The requirement being secured: resource adequacy, energy, system ancillary services, flexibility.

Procurement family

How each service is secured within a category. The grouping differs by category, because each service divides along a different natural line.

Mechanism

A distinct arrangement through which a resource is paid, or obliged, to provide a system service.

Example

A named instance of that mechanism operating in a jurisdiction, linked to its primary source.

The four categories are not independent. How they are designed and how well they interact determines whether a power system is efficient, investable and resilient. Three interdependencies are particularly consequential.

Signal separation and alignment

Availability, dispatch and flexibility each require distinct remuneration – but the signals must be mutually consistent. Resource adequacy mechanisms poorly coordinated with energy markets risk double remuneration and conflicting investment incentives. Long-term contracts that reward production regardless of market conditions undermine the dispatch signals that energy markets depend on.

Co-optimisation across services

Procuring energy, system ancillary services and flexibility services through separate, disconnected auctions risks missing the least-cost dispatch across all three. Real-time co-optimisation – managing all simultaneously – produces prices that more accurately reflect the true opportunity cost of each.

Participation and coordination

Demand-side resources, aggregators and distributed assets must be eligible to compete across all four categories on equal terms. TSO-DSO coordination is particularly critical as flexibility moves closer to the consumer – resources at distribution level can serve both local and system-wide needs simultaneously, but only if procurement rules and data flows between operators are aligned. Harmonising product definitions across borders extends this logic further, reducing costs and expanding the pool of available resources.

One principle cuts across all four: market rules built around synchronous, dispatchable generation require active updating. The structural shift towards inverter-based resources is already under way – the boundary between System Ancillary Services and Flexibility Services will continue to be tested as the same assets become capable of providing both. Procurement frameworks must evolve ahead of that shift.