Uncertainty and the long-term adequacy of supply: Simulations of capacity mechanisms in electricity markets

摘要

AbstractDeregulation in electricity markets has changed the conditions for maintaining long-term adequacy of supply. Particularly in the last decade, security of supply has become a major issue for policymakers due to a number of changes in technology, especially the introduction of renewables, where regulators have introduced capacity mechanisms. In this paper, we focus on the use of two different capacity mechanisms: procurement for long-term strategic reserves contracting, and centralized auctioning for capacity contracts. We investigate the effect of uncertainty on the effectiveness of these two mechanisms in maintaining a stable and sufficient supply of capacity. We use simulation to establish the behavior as the level of uncertainty is increased. Our results suggest that a market's level of uncertainty plays an important role in the effectiveness of these two interventions. The results raise questions about when it is appropriate to introduce either of them.Highlights?A stylized electricity market model is proposed to test two capacity mechanisms.?The model is used to test Strategic reserves and Centralized auctions.?Both mechanisms are tested with and without uncertainty.?The link between mechanisms' effectiveness and level of uncertainty is analyzed.]]>