Economics and Design of Capacity Markets for the Power Sector
AbstractCapacity markets are a means to assure resource adequacy. The need for a capacity market stems from several market failures the most prominent of which is the absence of a robust demand-side. Limited demand response makes market clearing problematic in times of scarcity. We present the economic motivation for a capacity market, present one specific market design that utilizes the best design features from various resource adequacy approaches analyzed in the literature, and we discuss other instruments to deal with the problems. We then discuss the suitability of the market for Europe and Germany in particular.
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Bibliographic InfoPaper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 12cocap.
Length: 21 pages
Date of creation: 2012
Date of revision: 2012
Publication status: Published in Zeitschrift für Energiewirtschaft, 36:113-134, 2012
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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu
Auctions; electricity auctions; capacity auctions; reliability auctions;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-ENE-2012-10-13 (Energy Economics)
- NEP-RES-2012-10-13 (Resource Economics)
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