Impact of capacity mechanisms and demand elasticity on generation adequacy with risk-averse generation companies

Coherency of the European resource adequacy framework

“…using the conditional value at risk or a hurdle rate) and the model's parameter values. The risk averseness of investors is however undesirable, as the lack of hedging instruments is a market imperfection which prevents reaching the optimal level of adequacy [9]. Its theoretically coherent value then is that investors should be risk neutral.…”

“…It implies that the framework is internally coherent if it achieves this goal. The framework is considered necessary because of market imperfections which would lead to deviations from the central planner solution, such as investor risk aversion coupled with the inability to effectively hedge investment risks and inflexible electricity demand [9].…”

Comparative Analysis of Risk-Aversion and Strategic Investment Behavior in Generation Expansion

“…The formulation of the energy consumer's problem is taken from Kaminski et al [1]. The energy consumer's surplus is modeled as the difference between Willingness-To-Pay (WTP) and the clearing price on the energy market.…”

“…In this paper, we apply the ADMM algorithm as presented in Kaminski et al [1]. In this context, the ADMM algorithm allows iteratively updating the agents' decisions and market prices according to the resulting market imbalances.…”

“…In theory, capacity markets deliver the socially optimal capacity mix, if the capacity target is set optimally and investors are perfectly rational [1]. However, in reality, several factors exist which may cause the investment equilibrium to be different from the social optimum [2].…”