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A survey on electricity market design: Insights from theory and real-world implementations of capacity remuneration mechanisms

Andreas Bublitz, Dogan Keles, Florian Zimmermann, Christoph Fraunholz and Wolf Fichtner

Energy Economics, 2019, vol. 80, issue C, 1059-1078

Abstract: In recent years, electricity markets have been characterized by a growing share of fluctuating renewable energies, which has increased concerns about the security of electricity supply. As a consequence, existing market designs are adapted, and new capacity remuneration mechanisms are introduced. However, these mechanisms entail new challenges, and it is disputed whether they are indeed needed. In this article, an overview of the current debate on the necessity of capacity remuneration mechanisms is provided. Furthermore, initial experiences of real-world implementations are discussed, and common findings in the literature, categorized by their economic implications, are derived. Finally, shortcomings in existing research and open questions that need to be addressed in future works are pointed out.

Keywords: Electricity market; Market design; Generation adequacy; Capacity markets; Capacity remuneration mechanisms (search for similar items in EconPapers)
JEL-codes: L13 L51 L94 P18 Q41 Q48 (search for similar items in EconPapers)
Date: 2019
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