We raise the question if improvements to current energy-only markets are sufficient to maintain resource adequacy in electricity markets or whether the rapid increase in wind and solar power gives stronger arguments for additional capacity mechanisms. A comparative analysis between Europe and the United States reveals some fundamental differences, but also many similarities in electricity…
Tag: Capacity Mechanisms
Demand Side Response: Patterns in Europe and Future Policy Perspectives under Capacity Mechanisms
Demand Side Response (DSR) has been slow to emerge in European electricity markets. This paper aims to both examine the reasons for low levels of DSR in Europe and reflect on factors that might affect the participation of DSR in capacity mechanisms. It relies on available evidence from the literature, secondary data on existing DSR…
Performance Incentives in Capacity Mechanisms: Conceptual Considerations and Empirical Evidence
Performance incentives are elements of capacity mechanism design aimed at prompting committed agents to manage their resources in such a way that they eventually meet their obligations when the system is tight. These incentives can be introduced in practice by means of two different (but non-conflicting) approaches in capacity mechanisms. First, performance incentives can be…