Evaluation of Market Potential in New Geographic Electricity Markets : OTC Trading Marketplaces

Abstract

The demand for more advanced technological and digitalized solutions is not only being motivated by technological changes, but also the present transition of the energy industry towards cleaner energy and efficiency. Companies within the electricity sector are capitalizing on these shifts by developing innovative digital platforms that meet such present market needs. Moreover, many companies are aware that different geographic areas present these energy transition characteristics in the market and thus motivate them to expand geographically. Nevertheless, the electricity market presents complex dynamics, especially in the wholesale sector—where electricity is actively bought and sold— creating a big challenge for companies entering such a market. This significant challenge arises primarily because evaluating market potential in the electricity sector requires more than traditional economic and qualitative metrics, it needs a deep and comprehensive analysis that incorporates quantitative metrics with a rigorous evaluation of external operational factors that directly impact the adoption and usability of the platform.

The objective of this thesis is to develop a framework for assessing market potential for an OTC electricity trading platform aiming to enter the U.S. electricity market. The framework integrates quantitative metrics with critical operational dynamics factors, such as regulatory framework, grid infrastructure, wholesale market liquidity, and electricity demand, to evaluate the attractiveness of the market. In order to develop the proposed framework, the first stage consists of analyzing the German electricity market and identify the critical operational factors. Furthermore, the second stage includes analyzing such critical operational factors in the U.S. electricity market and once the three most potential states are identified, apply them quantitative metrics to identify the state with the highest quantitative market potential. This framework allows for a detailed comparison of market readiness and identification of optimal entry points for the case company.

The results after applying the proposed framework indicate that the three specific U.S. states that present high market potential due to favorable regulatory conditions, well-connected infrastructure, high electricity demand, strong level of market liquidity, and significant economic metrics are Ohio, Pennsylvania and New York. However, among these three states, Ohio stands out as the state with the highest economic potential. The findings underscore the importance of aligning market demand with operational feasibility to facilitate successful platform adoption. This framework provides a practical tool for energy trading firms to prioritize regions with high growth potential and operational readiness, and it suggests directions for future research to further enhance market entry strategies within the evolving electricity sector.