Capacity Mechanisms in Europe and the US: A Comparative Analysis and a Real-Life Application for Greece

Christos K. Simoglou and Pandelis N. Biskas ()
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Christos K. Simoglou: Department of Mechanical Engineering, International Hellenic University, 62124 Serres, Greece
Pandelis N. Biskas: School of Electrical and Computer Engineering, Aristotle University of Thessaloniki, 54124 Thessaloniki, Greece

Energies, 2023, vol. 16, issue 2, 1-32

Abstract: This paper presents a comparative analysis of various capacity mechanisms that are either in force or under approval in key countries/regions in Europe and the US. A detailed analysis on the necessities that led to the establishment of the capacity mechanisms, along with various fundamental technical and operational features associated with the design and operation of different capacity mechanisms, mainly in Europe (Italy, France, Germany, Belgium, Poland, Great Britain, Ireland, Cyprus) and complementarily in the US (PJM, New England), are presented. This analysis is complemented by a real-life application regarding the long-term capacity remuneration mechanism that is expected to be established in Greece in the near future. A detailed simulation of the envisaged capacity mechanism auctions under differentiated scenarios has been performed, regarding the future Greek power system operating conditions during the forthcoming decade (2022–2031). Test results illustrate that the outcome of the auctions is heavily dependent on the future energy generation mix and the market participants’ bidding strategy. Whereas, the total cost that will have to be undertaken by the electricity supply companies and, ultimately, by the end-consumers for the financing of the proposed capacity mechanism lies in the range of 5.5–8.7 €/MWh for the entire study period.

Keywords: capacity auction; capacity mechanisms; demand curve; electricity cost; electricity supply; resource adequacy (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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