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The Greek Capacity Adequacy Mechanism: Design, Incentives, Strategic Behavior and Regulatory Remedies

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  • Sakellaris, Kostis

Abstract

This paper describes and analyzes the Greek Capacity Market or, as named, the “Capacity Adequacy Mechanism”. A detailed description of the recently established mechanism is given, whose design is a hybrid model combining elements from three different designs: the US Capacity Markets, the Capacity Payment Mechanisms and the Centralized Auctions for Capacity Contracts. Next, the goals of this design are explained. In the case of Greece the goals are not restricted just to the so-called “missing money” problem, therefore an analysis follows examining the incentives given to the market participants. The analysis shows the dependence of the mechanism on mainly two factors: the over/under-capacity of the market and the strategic behavior of the market participants, especially of the incumbent. In general, the Capacity Adequacy Mechanism is expected to operate quite satisfactory, giving the “right” incentives to the market participants. Some minor amendments to the rules are proposed, aiming to further increase its efficiency.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24642.

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Date of creation: Apr 2009
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Handle: RePEc:pra:mprapa:24642

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Related research

Keywords: Capacity Mechanisms; Electricity Markets; Mechanism Design; Strategic Behavior;

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References

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  1. Finon, Dominique & Pignon, Virginie, 2008. "Electricity and long-term capacity adequacy: The quest for regulatory mechanism compatible with electricity market," Utilities Policy, Elsevier, vol. 16(3), pages 143-158, September.
  2. De Vries, Laurens J., 2007. "Generation adequacy: Helping the market do its job," Utilities Policy, Elsevier, vol. 15(1), pages 20-35, March.
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Cited by:
  1. Kalantzis, Fotis & Sakellaris, Kostis, 2012. "Investigating the Impact of the Greek Electricity Market Reforms on its Day-Ahead Market Prices," MPRA Paper 37794, University Library of Munich, Germany.

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