Regulatory Design of Capacity Remuneration Mechanisms in Regional and Low-Carbon Electric Power Markets

P. Mastropietro

Research output: ThesisDissertation (TU Delft)

30 Downloads (Pure)

Abstract

Capacity remuneration mechanisms (CRMs) are “climbing” regulatory agendas in all liberalised power sectors, especially in the European Union. CRMs are introduced to improve system reliability and to minimise power shortages to an economically efficient extent. These schemes will have a central role in future power systems. This PhD thesis provides an in-depth review of CRM design elements and recommendations to increase their efficiency and effectiveness, particularly in view of the challenges that these mechanisms have to confront in the current power sector environment, characterised by the pursuit of decarbonisation. The attention is focused here on the interaction with regional market integration, the need for properly-designed performance incentives, and the interaction with renewable technologies.
The research is based on empirical evidence collected from international experiences, which is complemented, where applicable, by a model-based analysis to examine specific design elements. The outcomes of this PhD thesis can be summarised as follows.
• The participation of cross-border resources in national CRMs must be guaranteed in order to fully seize the benefits of regional market integration. However, this participation requires a strong commitment from power systems (and governments) in the regional market and the implementation of network codes and market rules that deter system operators from blocking exports when the latter are the outcome of an efficient market clearing. Where short-term markets are coordinated through market coupling, the algorithm must include a conditional nomination rule that ensures that, during regional scarcity conditions, available resources are assigned to those consumers that paid for them in the CRM market.
• CRMs must rely on robust performance incentives that foster the actual delivery of the committed capacity. High penalty rates may increase the cost of the capacity market, but the overall cost of electricity supply may decrease.
• Renewable technologies should be allowed to participate in CRMs and should be exposed to the market signals provided by these mechanisms. If renewable and conventional technologies must compete in the same markets, they should do it subject to the same rules. Obviously this participation must be coordinated with renewable support schemes, discounting CRM revenues.
Original languageEnglish
Awarding Institution
  • Delft University of Technology
Supervisors/Advisors
  • Herder, P.M., Supervisor
  • Batlle, C., Supervisor, External person
Award date17 Jun 2016
Print ISBNs978-84-608-5917-8
DOIs
Publication statusPublished - 2016

Bibliographical note

This doctoral research has been carried out in the context of an agreement on joint doctoral supervision between Comillas Pontifical University (Madrid, Spain), KTH Royal Institute of Technology (Stockholm, Sweden), and Delft University of Technology (Delft, the Netherlands). This doctoral research was funded by the European Commission through the Erasmus Mundus Joint Doctorate Program.

Keywords

  • Capacity remuneration mechanisms
  • security of supply
  • system adequacy
  • design elements
  • regional market integration
  • reliability options
  • performance incentives

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