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The effectiveness of capacity markets in the presence of a high portfolio share of renewable energy sources
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0957-1787
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Utilities policy, 2017, Vol. 48, pp. 76-91
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BHAGWAT, Pradyumna, IYCHETTIRA, Kaveri K., RICHSTEIN, Jörn C., CHAPPIN, Emile J. L., DE VRIES, Laurens J., The effectiveness of capacity markets in the presence of a high portfolio share of renewable energy sources, Utilities policy, 2017, Vol. 48, pp. 76-91 - https://hdl.handle.net/1814/48064
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.
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Available online 14 September 2017. Open Access funded by VSNU (Association of universities in the Netherlands). Under a Creative Commons license 4.0 International