A FRAMEWORK FOR DESIGNING CATEGORISING CAPACITY MARKETS – INSIGHTS FROM AN APPLICATION TO EUROPE

摘要

Many design choices are important in dictating how capacity markets operate. Three design choices (outlined above) have been found to capture the distinguishing features of commonly discussed models (Centralised Capacity Markets, Decentralised Capacity Markets, Capacity Obligation models, Capacity Subscription models, and Reliability Options models), and are therefore identified as first tier design choices.A large number of European countries have implemented or are discussing the introduction of capacity mechanisms. Designs of these mechanisms varies and issues such as the participation of capacity situated outside of a country’s borders are still being resolved in a number of instances. The fact that any such mechanism set up within an EU country has to conform to EU regulations, such as the rules on state aid, may lead to another set of impacts, such as designs being copied from successful applications. All of this will impact the path the EU takes towards a more integrated electricity market and a potential EU-wide capacity mechanism.