Impact of Coordinated Capacity Mechanisms on the European Power Market

Michael Bucksteeg (), Stephan Spiecker () and Christoph Weber ()
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Christoph Weber: Chair for Management Sciences and Energy Economics, University of Duisburg-Essen (Campus Essen)

EWL Working Papers from University of Duisburg-Essen, Chair for Management Science and Energy Economics

Abstract: There is an ongoing debate on the introduction of capacity markets in most European countries while a few of them have already established capacity markets. Since the implementation of independent national capacity markets is not in line with the target of a pan-European internal electricity market we investigate the impacts of uncoordinated capacity markets compared with coordinated capacity markets. A probabilistic approach for the determination of capacity requirements is proposed and a European electricity market model (E2M2s) is applied for evaluation. The model simultaneously optimizes investments and dispatch of power plants. Besides the impact on generation investments, market prices and system costs we analyse effects on production and security of supply. While coordinated capacity markets reveal high potentials for cross border synergies and cost savings, uncoordinated and unilateral implementations can lead to inefficiencies, in particular free riding effects and endanger security of supply due to adverse allocation of generation capacity.

Keywords: capacity markets; system adequacy; market design (search for similar items in EconPapers)
JEL-codes: Q40 (search for similar items in EconPapers)
Pages: 25
Date: 2017-01, Revised 2017-01
New Economics Papers: this item is included in nep-com, nep-ene, nep-eur and nep-reg
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:dui:wpaper:1701

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