The effectiveness of capacity markets in the presence of a high portfolio share of renewable energy sources

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

Research output: Contribution to journalArticleScientificpeer-review

20 Citations (Scopus)
31 Downloads (Pure)

Abstract

The effectiveness of a capacity market is analyzed by simulating three conditions that may cause suboptimal investment in the electricity generation: imperfect information and uncertainty; declining demand shocks resulting in load loss; and a growing share of renewable energy sources in the generation portfolio. Implementation of a capacity market can improve supply adequacy and reduce consumer costs. It mainly leads to more investment in low-cost peak generation units. If the administratively determined reserve margin is high enough, the security of supply is not significantly affected by uncertainties or demand shocks. A capacity market is found to be more effective than a strategic reserve for ensuring reliability.

Original languageEnglish
JournalUtilities Policy: strategy, performance, regulation
DOIs
Publication statusPublished - 2017

Keywords

  • Adequacy policy
  • Capacity markets
  • Security of supply

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