Market Design & Policy Advice
Creating the right environment to meet policy goals
Innovation and decarbonisation are changing the nature of global energy systems and the bioeconomy with disruptive technologies and active consumers.
AFRY Management Consulting provides bioindustry and energy market design consulting services to help clients understand how markets and policies must adapt to deliver frameworks for smart, flexible and secure systems.
Policymakers, such as governments and regulators worldwide, are rising to the challenge of decarbonising energy systems and the bioeconomy by supporting new low-carbon technologies and circular bio-based options to achieve net zero. To accomplish this in the energy sector, they are encouraging consumers to proactively manage their energy consumption and promoting greater integration between national markets.
Low-carbon support policies and carbon-capture technologies can offer new opportunities for investors, but the growing deployment of these less conventional technologies highlights that current market designs are not future-proof. Existing regulatory frameworks and market designs do not generally deal with more decentralised, digital and dynamic systems in a cost-effective and secure manner to improve risk management.
We are seeing the consequences of this across the energy sector and bio-based supply chains. Power capacity markets are emerging to address energy security concerns, while imbalance arrangements are adapting to support flexibility with more renewables. System operators are taking on smarter roles, and regulation is evolving to make demand aggregation and energy storage more accessible. These developments affect the value of existing business models and asset portfolios and the optimal strategies for achieving future growth.
Understanding how these market frameworks operate is nothing new for AFRY. We have a long history of engaging in such projects for our clients, from design to implementation. Our clients have been both private companies and public bodies, single customers as well as large consortia. We go beyond merely handing over reports to our clients. Instead, we also cater to their information dissemination needs by developing communication strategies, hosting events or providing expertise in legislative committee hearings.
AFRY's market design, policy and regulation consulting offerings
Our broad range of expertise enables us to:
- assess how changes in market fundamentals and technologies affect current market players;
- develop future-oriented market design options;
- conduct detailed modelling of market arrangements;
- work with stakeholders to implement new market designs; and
- formulate strategies to operate within revised markets.
Policy and regulation guidance
Effective policy development begins with a clear identification of challenges and objectives. Using tools like PESTLE analysis (Political, Economic, Social, Technological, Legal and Environmental), policy-makers can gain a comprehensive understanding of the landscape. Stakeholder engagement plays a pivotal role in this process, ensuring that the voices of the public and private sectors and investors are heard. This approach enables the collaborative development of options that undergo rigorous impact assessments to evaluate their feasibility and potential effects.
The implementation phase is critical for turning these policies into actionable realities. Establishing governance arrangements, delivering structured platforms and designing roadmaps ensures a smooth rollout and adherence to policy objectives. Close collaboration between stakeholders further strengthens this process, minimising risks and aligning priorities.
To ensure long-term efficacy, evaluation and monitoring mechanisms are vital. This involves designing theories of change, employing quantitative modelling, and conducting multi-criteria analyses to measure outcomes. Monitoring market behaviour and the resulting implications on strategies and business opportunities ensures policies remain relevant and effective.
Regulation is at the heart of market stability and growth. A thorough landscape review of existing national and international regulations provides clarity on compliance requirements and their implications for industry players. This insight enables businesses to anticipate changes and adapt proactively.
Framework design focuses on developing incentive structures, codes of practice, and pricing controls that encourage innovation and efficiency. These measures balance market dynamics, ensuring that decentralised and renewable-ready systems operate smoothly while maintaining economic viability.
Compliance remains a key focal point for all market participants. By conducting audits and regular monitoring, businesses can meet regulatory standards, reduce risks and promote trust among stakeholders. Strong compliance frameworks not only safeguard operations but also position companies as reliable and forward-thinking market contributors.
Adaptations to market design and the implementation of informed policies significantly impact market behaviours and business strategies.
For example, the rise of flexibility mechanisms through imbalance arrangements or the integration of energy storage into local grids changes how businesses optimise operations. Similarly, capacity markets are emerging to ensure energy security, creating new opportunities for investors and stakeholders in these evolving systems.
These shifts require strategic foresight. Companies must evaluate the risks and opportunities presented by new market frameworks while aligning their objectives with long-term sustainability and growth trends.
Client testimonials
Finnish Energy, like many of our member companies, has repeatedly trusted on AFRY's (former Pöyry) expertise and energy models whether it has been about future of energy, investment needs caused by legislation or outlook for fuel markets. These have contributed to developing our own operations as well as preparation and implementation of the Finnish energy policy. AFRY's role has been crucial in the development of successful energy system.
Jukka Leskelä, Managing Director of Finnish Energy
Accolades
10 GW of new interconnection capacity to GB in Ofgem's Cost Benefit Analysis, supported by AFRY Management Consulting
Frequently asked questions
- How can businesses adapt their strategies to align with new frameworks in energy and bioeconomy market design?
- What are the primary challenges in complying with policies for sustainable energy systems and bioeconomy growth?
- How does AFRY assist companies with international regulatory compliance across energy and bioeconomy markets?
- How can stakeholders collaborate to design sustainable and innovative energy market structures that adapt to technological and market changes?
- How does market design differ in the energy, bio-based and sustainability transformation sectors?
Businesses can adapt their strategies to align with new frameworks in energy and bioeconomy market design by staying proactive and informed. Understanding regulatory changes is key, as businesses need to analyse evolving policies and their potential impact on operations. Partnering with industry experts can provide valuable insights and guidance, ensuring compliance while identifying opportunities within the regulatory landscape.
Investing in sustainable technologies, like carbon capture and renewable energy systems, is another critical step. These innovations not only meet policy requirements but also contribute to long-term competitiveness in a shifting economy. Collaboration, both within the industry and with policy-makers, enhances the development of forward-thinking solutions that address shared challenges.
Flexibility is essential in strategy adaptation. By staying agile and prepared to adjust to technological advancements and market shifts, businesses can turn change into opportunity. Regularly analysing market trends and policy developments equips organisations with the tools to make informed decisions and remain leaders in their field. This combination of insight, innovation, and collaboration paves the way for success in the evolving energy and bioeconomy sectors.
Complying with policies for sustainable energy systems and bioeconomy growth poses several challenges that need to be carefully addressed for businesses and organisations.
Regulatory complexity is one significant issue. Policies often differ across regions and sectors, creating a patchwork of requirements that can be difficult to understand and follow. Navigating complexity requires constant attention to policy updates and a clear understanding of regulatory expectations.
Cost implications also play a key role. Transitioning operations and systems to meet stricter sustainability guidelines often involves substantial investments in new technologies, processes and infrastructure. These costs can be particularly burdensome for smaller businesses or those operating on tight margins.
Technological adaptation presents another hurdle. Many policies call for the adoption of advanced solutions, such as renewable energy systems or innovative bio-based processes. However, implementing these technologies requires both expertise and resources, which can act as barriers for businesses that lack the necessary support or knowledge.
Resource availability is often a challenge, as the shift to sustainable energy and bioeconomy models relies on access to materials, skilled labour and funding. Ensuring supply chains and workforces are equipped to support these transitions is crucial yet demanding.
Collaboration with stakeholders is essential for successful compliance. Partnering with industry peers, policymakers and experts in the field can provide guidance and solutions to common challenges. Resistance to change, however, can be a significant obstacle. Businesses may face internal or external opposition when implementing reforms, particularly if stakeholders are concerned about disruptions or short-term costs.
Ultimately, aligning business practices with policy requirements requires a proactive, informed approach. By staying updated on policy changes, investing in appropriate technologies and collaborating, organisations can turn compliance challenges into opportunities for growth and innovation.
AFRY assists clients in complying with international regulations and policies across energy and bioeconomy markets by leveraging extensive expertise in the regulatory landscape. Our team of regulatory experts provides in-depth policy advice and actionable insights, enabling businesses to understand and adapt to complex regulations.
Through detailed analysis, we identify potential investments and opportunities, ensuring that companies can strategically align their operations with evolving requirements. By addressing challenges in infrastructure and utilities and applying their specialised skills, we empower businesses to achieve success in a shifting economy while laying the groundwork for sustainable growth and innovation.
Addressing the complexities of energy markets requires collaboration between policymakers, industry players and regulatory bodies. AFRY's comprehensive expertise highlights how advancements in technologies and market fundamentals affect existing systems. By working with stakeholders to design and implement forward-thinking market structures, businesses can proactively shape the future of energy.
Whether it’s redesigning market rules, analysing regulatory impacts or promoting cross-national cooperation, the path forward relies on unity and strategic innovation. Through transparent processes and targeted strategies, the energy sector can achieve a more sustainable, secure and inclusive future.
There are stark differences in the technical complexity of market design. Energy markets are underpinned by real-time trading systems, which require advanced technologies for demand forecasting and pricing mechanisms, such as wholesale power markets and electricity tariffs. For example, electricity markets in the US operate through intricate regional transmission organisations (RTOs) that maximise grid efficiency while adhering to strict regulatory guidelines.
Conversely, bio-based industries typically lack such immediate, technology-driven market mechanisms, although they are interconnected with global trade flows. Instead, market design in the bioindustry often revolves around collaborating in partnerships, aligning incentives and creating demand for sustainable products. Policies such as the EU’s bioeconomy strategy and Canada’s forest sector transformation programme aim to bolster innovation and market share for bio-based goods.
The sustainability transformation sector, which encompasses industries like renewable energy, circular materials and waste-to-energy, represents a convergence of energy market expertise and bio-industry practices. Market design related to it often balances environmental goals with economic feasibility. Net-zero policies, such as incentives for carbon capture and storage (CCS), mirror the energy sector’s approach while promoting innovations in waste reduction and materials recovery.
For instance, while the development of emission trading schemes (ETS) was originally tailored for energy markets, ETS has been adapted to other sustainability sectors, including industrial manufacturing and agriculture, to cap emissions and drive greener processes. The combination of these concepts suggests a growing potential for shared regulatory frameworks and market strategies.
