Abstract
Capacity Remuneration Mechanisms in the EU: Today, Tomorrow, and a Look Further Ahead
Highlights
When discussing security of supply, it is important to distinguish between resource adequacy and system reliability, jointly often referred to as security of supply
The capacity values of wind are in most cases positively affected by cross-border cooperation. In response to these concerns, the Clean Energy Package (CEP) introduced the European Resource Adequacy Assessment (ERAA) whose outcome directly impacts the possibility to introduce a Capacity Remuneration Mechanisms (CRM) in a Member State
A shortage price function, known as an Operating Reserve Demand Curve (ORDC), has been in place since several years in a selection of US power markets such as those managed by the Electric Reliability Council of Texas (ERCOT), the Midcontinent Independent System Operator (MISO), and the Pennsylvania-New Jersey-Maryland Interconnection (PJM) (Papavasiliou and Smeers 2017; Hogan 2013)
Summary
The European Union Agency for the Cooperation of Energy Regulators (ACER) and the Council for European Energy Regulators (CEER) prepare EU-wide energy market monitoring reports. On the basis of the proposals for the introduction of CRMs submitted to the European Commission, Papavasiliou (2021) provides an overview of the rationale used in the different countries (Italy, the UK, Ireland and France) to justify the need for a capacity market. Many other factors play a role, such as the level of interconnectivity of a country This might explain the relatively higher costs for Ireland and Great Britain. An important remark to add is that costs as shown in Figure 3 are the gross costs of the CRMs, i.e. the money paid to the beneficiaries of the mechanism. Looking from a whole system perspective, the existence of a CRM, even when having a relatively minor cost, has an impact on prices in wholesale markets and can bring other important additional costs and benefits.
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