Capacity Mechanisms in the EU Energy Markets

Abstract

Abstract Since the first edition of this book (2015), capacity remuneration mechanisms (or simply capacity mechanisms) have become a fact of life in European Union Member States’ energy markets. Concerned about their security of supply, national governments are implementing subsidy schemes to encourage investment in conventional power generation capacity, alongside subsidized renewable energy sources. With the increasingly connected European electricity markets, the introduction of a capacity mechanism in one country not only tends to distort its national market but also may have unforeseeable consequences for neighbouring electricity markets. The second edition of this book will take stock of the experience so far with regard to how capacity mechanisms actually work and what consequences they have for the European internal electricity market. In particular, first, it will provide a cross-disciplinary view on capacity mechanisms, combining legal, economic, and policy perspectives; secondly, it will include a detailed overview of national capacity mechanisms and their implications for the EU internal market; thirdly, it will take a European approach, recognizing the need to understand the nature of market failures which are likely to occur in the European electricity markets; and, finally, it will offer an outsider view on the current developments in Europe, including contributions of recognized extra-EU energy experts. The second edition of this book is intended to serve as a point of reference for regulators and policy-makers on how to design optimal capacity mechanisms in Europe. It will be an invaluable resource for anyone interested in energy market design, regulation, and competition issues.