The social Efficiency of long-term capacity reserve mechanisms

Dominique Finon, Guy Meunier and Virginie Pignon
Additional contact information
Dominique Finon: CIRED - centre international de recherche sur l'environnement et le développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, EHESS - École des hautes études en sciences sociales
Virginie Pignon: EDF R&D - EDF R&D - EDF - EDF

Post-Print from HAL

Abstract: In Public Economics, the simple supply mechanism for a collective good is the centralised provision by government, and paid by all beneficiaries through a small and targeted tax. In the case of capacity adequacy in power supply, which could be considered as a collective good, two solutions of supply by government can be envisaged: a long-term capacity reserve contracting by the system operator (SO), and a direct installation of peaking units by the SO. However, the centralised and direct mechanisms are criticised, because of its potential to distort incentives to invest in peaking units and hence the natural functioning of energy markets. This paper analyses the different characters of a simple capacity mechanism and the safeguards used to limit its potential distortion effects. We discuss its deterrent effects on investment in peaking units. We also demonstrate its advantage in the context of hydro or mixed electricity systems exposed to the risk of exceptionally dry years.

Keywords: Power market; Capacity adequacy; Reliability; Strategic reserves (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Published in Utilities Policy, 2008, pp.202-214. ⟨10.1016/j.jup.2008.01.001⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: The social efficiency of long-term capacity reserve mechanisms (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00361717

DOI: 10.1016/j.jup.2008.01.001

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().