Cross-border effects of capacity mechanisms in interconnected power systems

Pradyumna C. Bhagwat*, Jörn C. Richstein, Emile J.L. Chappin, Kaveri K. Iychettira, Laurens J. De Vries

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

34 Citations (Scopus)
58 Downloads (Pure)


The cross-border effects of a capacity market and a strategic reserve in interconnected electricity markets are modeled using an agent-based modeling methodology. Both capacity mechanisms improve the security of supply and reduce consumer costs. Our results indicate that interconnections do not affect the effectiveness of a capacity market, while a strategic reserve is affected negatively. The neighboring zone may free ride on the security of supply provided by the zone implementing a capacity mechanism. However, a capacity market causes crowding out of generators in the energy-only zone. A strategic reserve implemented by this region could aid in mitigating this risk.

Original languageEnglish
Pages (from-to)33-47
Number of pages15
JournalUtilities Policy: strategy, performance, regulation
Publication statusPublished - 2017


  • Capacity market
  • Cross-border effect
  • Strategic reserve


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