Cross-border effects of capacity mechanisms: Do uncoordinated market design changes contradict the goals of the European market integration?

Roland Meyer and Olga Gore

Energy Economics, 2015, vol. 51, issue C, 9-20

Abstract: This paper analyses cross-border effects of a strategic reserve (SR) and reliability options (ROs) based on a two-country simulation model. Using a game-theoretic approach, the countries' policy options for capacity remuneration mechanisms (CRMs) are analysed with respect to welfare and distribution effects. An SR tends to narrow down the market, while ROs intensify price competition. However, cross-border effects are most likely negative for consumers and producers in total in the case of a unilateral implementation of a CRM, and market design changes should be coordinated.

Keywords: Market design; Generation adequacy; Capacity mechanisms; Internal European Market (search for similar items in EconPapers)
JEL-codes: D47 L11 L52 L94 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:51:y:2015:i:c:p:9-20

DOI: 10.1016/j.eneco.2015.06.011

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