IDEAS home Printed from https://ideas.repec.org/p/bei/00bewp/0017.html
   My bibliography  Save this paper

Cross-Border Effects of Capacity Mechanisms: Do Uncoordinated Market Design Changes Contradict the Goals of the European Market Integration?

Author

Listed:
  • Roland Meyer
  • Olga Gore

Abstract

This paper analyses cross-border effects of a strategic reserve (SR) and reliability options (ROs) based on a two-country simulation model. Using a game-theoretic approach, the countries' policy options for capacity remuneration mechanisms (CRMs) are analysed with respect to welfare and distribution effects. An SR tends to narrow down the market, while ROs intensify price competition. However, cross-border effects are most likely negative for consumers and producers in total in the case of a unilateral implementation of a CRM, and market design changes should be coordinated. All results are strongly driven by possible changes in competition and market power. In practice, the market design decision should also consider possible regulatory failures that might lead to further market distortions. The risk of market design flaws seems larger for full capacity markets such as ROs than for an SR, which requires only minor adjustments to the market design.

Suggested Citation

  • Roland Meyer & Olga Gore, 2014. "Cross-Border Effects of Capacity Mechanisms: Do Uncoordinated Market Design Changes Contradict the Goals of the European Market Integration?," Bremen Energy Working Papers 0017, Bremen Energy Research.
  • Handle: RePEc:bei:00bewp:0017
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988315001863
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lynch, Muireann Á. & Devine, Mel, 2015. "Investment vs. Refurbishment: Examining Capacity Payment Mechanisms Using Mixed Complementarity Problems With Endogenous Probability," Papers WP507, Economic and Social Research Institute (ESRI).
    2. Lorenczik, Stefan, 2019. "Interaction effects of market failure and CRMs in interconnected electricity markets," Energy Policy, Elsevier, vol. 135(C).
    3. Muireann A. Lynch and Mel T. Devine, 2017. "Investment vs. Refurbishment: Examining Capacity Payment Mechanisms Using Stochastic Mixed Complementarity Problems," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).

    More about this item

    Keywords

    market design; generation adequacy; capacity mechanisms; internal European market;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bei:00bewp:0017. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marius Buchmann (email available below). General contact details of provider: http://bremen-energy-research.de/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.