Capacity adequacy in power markets facing energy transition: A comparison of scarcity pricing and capacity mechanism

Petitet, Marie; Finon, Dominique; Janssen, Tanguy

doi:10.1016/j.enpol.2016.12.032

Cited by 88 publications

(37 citation statements)

References 24 publications

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“…But participants are unable to optimise the frequency and intensity of price spikes (Cramton and Stoft, 2005). Moreover Market Price Caps are frequently set too low (Batlle and Pérez-Arriaga, 2008;Joskow, 2008;Petitet, Finon and Janssen, 2017;Bublitz et al, 2019;Milstein and Tishler, 2019) in which case a stable financial equilibrium can only be reached if the power system is operating near the edge of collapse (Bidwell and Henney, 2004;Simshauser and Ariyaratnam, 2014). 15 See also (Besser, Farr and Tierney, 2002;de Vries, 2003;Oren, 2003;Wen, Wu and Ni, 2004;Batlle and Pérez-Arriaga, 2008;Finon and Pignon, 2008).…”

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Merchant renewables and the valuation of peaking plant in energy-only markets

Simshauser

2020

Energy Economics

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Merchant renewables are a new asset class. With historically high cost structures and low wholesale prices associated with merit order effects, continuity of entry has been reliant on Renewable Portfolio Standards or other policy initiatives such as government-initiated Contracts-for-Differences. But in Australia's National Electricity Market, sharply falling costs of renewables and volatile wholesale market conditions from coal plant exits has led to a surprising number of merchant intermittent renewable investments. Adding to the merchant renewable fleet are older wind plants whose inaugural long-dated PPAs recently matured. Rolling over PPAs is possible, but not necessarily optimal. In this article, a merchant gas turbine, merchant wind, and an integrated portfolio comprising both plants are valued in the NEM's South Australian region. Asset valuations reveal surprising results. The modelling sequence shows stand-alone gas turbine valuation metrics suffer from modest levels of missing money, that merchant wind can commit to some level of forward (fixed volume) swap contracts in-spite of intermittent production, but the combined portfolio tightens overall valuation metrics significantly. Above all, the combined portfolio is financially tractable, overcoming the missing money for a gas turbine plant undertaking peaking duties. In a NEM region where intermittent renewable market share exceeds 50%, this suggests the energy-only, real-time gross pool design may yet be deemed suitable vis-à-vis meeting environmental objectives and Resource Adequacy. Cambridge Working Papers in Economics Faculty of Economics www.eprg.group.cam.ac.uk Merchant renewables and the valuation of peaking plant in energy-only markets

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Merchant renewables and the valuation of peaking plant in energy-only markets

Simshauser

2020

Energy Economics

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“…Some experts consider that externalities should be corrected by introducing additional "energy markets" with prices at finer spatial and time scales (Newbery et al, 2018;Leslie et al, 2020). Others emphasize the importance of capacity payments to address the externality related to capacity availability while keeping in mind market power issues and risk-aversion (Fabra, 2018;Petitet, Finon and Janssen, 2017). In particular, Fabra (2018) discusses reliability options, which provide capacity payments but also incentivize capacity availability and address market power issues.…”

Section: Discussionmentioning

confidence: 99%

Ring the Alarm! Electricity Markets, Renewables, and the Pandemic

Benatia

2020

SSRN Journal

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“…This solution is used in many European countries, although in details it differs from the legislative side in particular countries [81]. The capacity mechanism is designed to minimize impact on market functioning [82,83].…”

Section: Disadvantages Of the Zonal Modelmentioning

confidence: 99%

Zonal and Nodal Models of Energy Market in European Union

Borowski

2020

Energies

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Along with economic development and development of power systems, new, more effective models of the energy market are sought. Traditional zonal models used on the electricity market have proved to be poorly adapted to new circumstances and phenomena occurring in the macroeconomic environment. The main aim of the research was to show the direction (including the nodal model and prosumer behavior) in which the energy market should develop in order to meet the state-of-the-art technical, ecological and social challenges. Therefore, with the new challenges, a new chapter has opened up on very interesting research for the electrical industry. There are new solutions for the development and modernization of models from the point of view of management and econometrics of the energy market, adapted to new challenges related to ecology, technology, and competition. This article presents the zone model with its imperfections and suggestions for its improvement and proposes a nodal model that may in the near future become a new model for the functioning of the electricity market in Europe.

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Capacity adequacy in power markets facing energy transition: A comparison of scarcity pricing and capacity mechanism

Cited by 88 publications

References 24 publications

Merchant renewables and the valuation of peaking plant in energy-only markets

Merchant renewables and the valuation of peaking plant in energy-only markets

Ring the Alarm! Electricity Markets, Renewables, and the Pandemic

Zonal and Nodal Models of Energy Market in European Union

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