Market Design for Generation Adequacy: Healing Causes rather than Symptoms
Fabien Roques ()
Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
This paper argues that electricity market reform – particularly the need for complementary mechanisms to remunerate capacity – need to be analysed in the light of the local regulatory and institutional environment. If there is a lack of investment, the priority should be to identify the roots of the problem. The lack of demand side response, short-term reliability management procedures and uncompetitive ancillary services procurement often undermine market reflective scarcity pricing and distort long-term investment incentives. The introduction of a capacity mechanism should come as an optional supplement to wholesale and ancillary markets improvements. Priority reforms should focus on encouraging demand side responsiveness and reducing scarcity price distortions introduced by balancing and congestion management through better dialog between network engineers and market operators.
Keywords: electricity market; generation adequacy; market design; capacity mechanism. (search for similar items in EconPapers)
JEL-codes: D24 D43 D92 L94 (search for similar items in EconPapers)
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Journal Article: Market design for generation adequacy: Healing causes rather than symptoms (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0821
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