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Long term issues to be addressed by regulators in liberalised electricity systems: generation adequacy and indicative planning. Justification, available mechanisms, and a simulation study on some concrete policies

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  • Álvaro López-Peña
  • Efraim Centeno
  • Julián Barquín
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    Abstract

    For ensuring electricity security of supply in the long run, liberalised electric systems’ regulators have to worry, not only about the presence of enough installed capacity, but also about the generation mix. Hence, indicative planning must be taken into account as well, for limiting dependence upon nonindigenous fuels, for instance. This can, simultaneously, help in meeting growing environmental constraints: renewables promotion is a clear example. There exist several mechanisms for addressing the adequacy problem (having enough megawatts) and for promoting renewables (having the good megawatts). In this study, a brief review of these mechanisms is done, and some are chosen for assessing their efficacy and efficiency over a system similar to the Spanish one, concretely capacity payments and capacity markets for the first problem and renewable energy premiums for the second. A simulation study is performed, which confirms the better characteristics of capacity markets in stabilising reserve margins, but whose effects may be damaged by an inadequate renewables promotion policy.

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    Bibliographic Info

    Paper provided by European University Institute in its series RSCAS Working Papers with number 2009/67.

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    Date of creation: 22 Dec 2009
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    Handle: RePEc:rsc:rsceui:2009/67

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    Related research

    Keywords: system-dynamics; generation capacity investment analysis; feed-in-premiums; capacity mechanisms;

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    1. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, American Finance Association, vol. 29(2), pages 449-70, May.
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    7. De Vries, Laurens J., 2007. "Generation adequacy: Helping the market do its job," Utilities Policy, Elsevier, Elsevier, vol. 15(1), pages 20-35, March.
    8. Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
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