## 3 Operation of the Electricity Market  
The European electricity market is a complex system designed to coordinate the generation, distribution and consumption of electricity across Europe, based on principles of competition, regional integration and sustainability, with the aim of ensuring secure, accessible and environmentally friendly electricity supply.  
The European electricity market is divided into two main levels:  
* Wholesale market: in this market, electricity generators such as nuclear, solar, wind and gas plants sell electricity to retailers, large consumers or directly to the grid. The wholesale market is organized into different temporary markets:
* Day-ahead market: here participants bid and offer to buy and sell electricity for the next day. Prices are determined based on an auction mechanism, where the cross between supply and demand establishes the marginal price, as shown in Figure 2. This price is applied uniformly to all transactions in that interval.
* Intraday market: adjusts daily market forecasts by allowing participants to modify their bids according to changes in production or demand.
* Adjustment market: ensures that supply and demand are balanced in real time.
* Retail market: here electricity is sold by retailers to final consumers (households, businesses and industry). Prices in the retail market are influenced by wholesale market costs, network tariffs, taxes and other factors.  
The European electricity system is overseen by national transmission system operators (TSOs), such as Red Electrica de Espana (REE) or TenneT in Germany, which are responsible for managing the electricity grids and ensuring the balance between supply and demand.  
The integration of renewable energy has been a priority in Europe [12]. European Union (EU) energy policies encourage investment in clean energy through the European Emissions Trading System (ETS) and subsidies for clean technologies. However, the intermittent nature of sources such as solar and wind poses challenges, such as the need for increased energy storage capacity and flexibility in the system. Lessons learned from the UK electricity market reform provide a valuable framework for designing policies to improve the competitiveness and sustainability of the European electricity market [13].  
One of the greatest achievements of EU energy policy has been the creation of a single electricity market, which allows cross-border trade and promotes efficiency, as countries can import or export electricity according to their needs and capacities. Prices are therefore interconnected at the European level and fluctuations in one country can affect others.  
Interconnections between national grids are key as they allow the transfer of electricity between countries, helping to stabilize prices and avoid the risk of blackouts.  
The European electricity market follows a marginal price model, which means that the price of electricity in a given time interval is determined by the most expensive generation plant needed to meet demand at that time. This approach is used to ensure that the cheapest energy sources (such as renewables) are dispatched first but can result in the final market price being set by more expensive technologies, such as gas-fired plants. This situation creates what is known as the'market paradox', where, despite the use of renewables with near-zero marginal costs, the final price of electricity may still be high due to the use of more expensive sources to balance demand.  
In the long term, it is crucial to ensure the stability of the electricity system to avoid significant imbalances between supply and demand, which is achieved through market mechanisms that encourage investment in back-up storage technologies. Continuity of service can be ensured by adopting a market-based approach that appropriately integrates generation costs and reserve requirements, thus achieving a sustainable balance over time [14].  
Figure 2: Daily market clearing [11].