Capacity market functioning with renewable capacity integration and global practices

Parmar, Ashok; Darji, B. Pranav B

doi:10.1016/j.tej.2019.106708

Cited by 12 publications

(7 citation statements)

References 32 publications

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“…There exists a vast literature on CRMs that focuses on their need and effectiveness as investment incentives to deliver security of supply (Cramton et al (2013), Spees et al (2013), Roques (2008)) and on specific markets' analyses (United Kingdom Bhagwat et al (2017), Germany Neuhoff et al (2016), Ozdemir et al (2013), Italy Mastropietro et al (2018) , Ireland and others Hancher et al (2015), Poland Przemyslaw et al (2021), the United States Lin and Vatani (2017), Bowring (2013), and other markets throughout the world Galetovic et al (2015), Ashokkumar et al (2020)). A smaller set of works analyze quantitatively the option value of the power capacity.…”

Section: Literature Reviewmentioning

confidence: 99%

The Energy Transition and the Value of Capacity Remuneration Mechanisms

Bonaldo,

Fontini,

Moretto

2022

SSRN Journal

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Section: Literature Reviewmentioning

confidence: 99%

The Energy Transition and the Value of Capacity Remuneration Mechanisms

Bonaldo,

Fontini,

Moretto

2022

SSRN Journal

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“…Although both policies have achieved their direct goals of pricing certain objects through marketbased policy instruments, the interaction between these two prices and the subsequent impacts on the electricity market have been less investigated. Previous qualitative studies [21][22][23] focused on the barrier and misalignment of integration among electricity-systemrelated mechanisms such as variable renewable energy (VRE) incentives, CO 2 emission trading or taxing, and the capacity remuneration mechanism. A growing number of studies have investigated the interaction between VRE incentives and carbon pricing [24,25], increasing VRE's share and capacity remuneration mechanisms [26].…”

Section: Introductionmentioning

confidence: 99%

Will Capacity Mechanisms Conflict with Carbon Pricing?

et al. 2022

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Climate change and related national mitigation targets make the decarbonization of the power sector an urgent need. The power sector faces the challenge of considering the design and interaction between emission reduction policies, which can sometimes counteract each other. This study proposes a framework that can be used to quantitatively study the qualitative link between carbon pricing and capacity pricing. The framework is validated through a case study in Hokkaido, Japan, and used to further investigate the interaction between the two policies through a System Dynamics simulation model and scenario design. The results indicate that a carbon price would promote the introduction of wind power, as well as the reduction in fossil fuels, while the capacity price will mitigate the boom-and-bust investment cycle and stabilize electricity prices. However, when the two policy-based prices act on the power system simultaneously, the advantages will be offset by each other. The existence of the capacity price partially offsets the emission reduction effect of the carbon price, and the carbon price with a lower floor will also indirectly squeeze the generation space of flexible power plants. In order to address these inefficiencies, this study proposed a capacity price focused on subsidizing flexible power plants and also coupled with a higher floor carbon price, which results in a consistent incentive. It also promotes the decommissioning of carbon-intensive base-load power plants and reduces CO2 emissions significantly.

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“…CRMs include a broad range of instruments, such as strategic reserve [1], capacity payments, capacity obligations, reliability options, and centralized and decentralized capacity markets [2][3][4]. They are implemented in many European countries (i.e., the United Kingdom [5], Germany [1,6], Italy [7], Ireland, and others [8][9][10]), as well as in the United States [11][12][13][14], and others throughout the world [15,16]. According to the literature and policymakers, their main goal should be to ensure appropriate investment incentives for power generation units [2,13,17] to secure stable and economically efficient power generation [18,19].…”

Section: Introductionmentioning

confidence: 99%

Capacity Market and (the Lack of) New Investments: Evidence from Poland

et al. 2021

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Capacity remuneration mechanisms operate in many European countries. In 2018, Poland implemented a centralized capacity market to ensure appropriate funding for the existing and new power generation units to improve long-term energy security. One of the declarations made while the mechanism was deployed was its beneficial influence on incentives for investments in new units. In this context, this paper aims to analyze the effects of the capacity mechanism adopted for investments in new power generation units that may be financed under the capacity market mechanism in Poland. The analysis is conducted for four types of capacity market units, the existing, refurbishing, planned, and demand-side response types, and includes the final results of capacity auctions. The results prove that the primary beneficiaries of the capacity market in Poland have been the existing units (including the refurbishing ones) responsible for more than 80% of capacity obligation volumes contracted for 2021–2025. Moreover, during the implementation of the capacity market in Poland, the planned units that signed long-term capacity contracts with a total share of 12% of the whole market were already at the advanced phases of construction, and the investment decisions were made long before the implementation of the capacity market mechanism. Therefore, they were not associated with the financial support from the capacity market. The study indicates that the capacity market did not bring incentives for investments in new power generation units in the investigated period.

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Capacity market functioning with renewable capacity integration and global practices

Cited by 12 publications

References 32 publications

The Energy Transition and the Value of Capacity Remuneration Mechanisms

The Energy Transition and the Value of Capacity Remuneration Mechanisms

Will Capacity Mechanisms Conflict with Carbon Pricing?

Capacity Market and (the Lack of) New Investments: Evidence from Poland

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