Capacity mechanism – some properties of its design and remuneration

  • 1 University of Economics Varna, Bulgaria


The instant paper deals with the mechanism for capacity provision, which is instrumental for the operation of the capacity market. The latter belongs to the wholesale electricity market and complements the energy only one. The capacity market is tasked with securing reliable power generation under the conditions of imbalance and stress for the energy system. Capacity and energy only markets interact in a consistent manner, thus their proper operation becomes crucial. The capacity market, however, seems to be expensive and few energy systems throughout the EU rely on it. Therefore, it is important to draw a line between different capacity mechanisms already set up and operated in terms of their most important features such as physical volume and clearing price setting. This analysis seems relevant for policy-makers’ decision to adopt or to dismiss the mechanism for capacity in Bulgaria.



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