Central- versus Self-Dispatch in Electricity Markets

Ahlqvist, Victor; Holmberg, Pär; Tangerås, Thomas

doi:10.17863/cam.37459

2019

DOI: 10.17863/cam.37459

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Central- versus Self-Dispatch in Electricity Markets

Victor Ahlqvist¹,

Pär Holmberg²,

Thomas Tangerås³

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Optimal Capacity Mechanisms for Competitive Electricity Markets

Holmberg¹,

Ritz²

2020

The Energy Journal

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Capacity mechanisms are increasingly used in electricity market design around the world yet their role remains hotly debated. This paper introduces a new benchmark model of a capacity mechanism in a competitive electricity market with many different conventional generation technologies. We consider two policy instruments, a wholesale price cap and a capacity payment, and show which combinations of these instruments induce socially-optimal investment by the market. Our analysis yields a rationale for a capacity mechanism based on the internalization of a system-cost externality—even where the price cap is set at the value of lost load. In extensions, (i) we show how increasing variable renewables penetration can enhance the need for a capacity payment under a novel condition called “imperfect system substitutability”, and (ii) we outline the socially-optimal design of a strategic reserve with a targeted capacity payment.

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Optimal Capacity Mechanisms for Competitive Electricity Markets

Holmberg¹,

Ritz²

2020

The Energy Journal

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show abstract

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Central- versus Self-Dispatch in Electricity Markets

Cited by 1 publication

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Optimal Capacity Mechanisms for Competitive Electricity Markets

Optimal Capacity Mechanisms for Competitive Electricity Markets

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