The Greek Capacity Adequacy Mechanism: Design, incentives, strategic behavior and regulatory remedies

Abstract

Abstract-This paper describes and analyzes the Greek Capacity Market or, as named, the "Capacity Adequacy Mechanism". A detailed description of the recently established mechanism is given, whose design is a hybrid model combining elements from three different designs: the US Capacity Markets, the Capacity Payment Mechanisms and the Centralized Auctions for Capacity Contracts. Next, the goals of this design are explained. In the case of Greece the goals are not restricted just to the so-called "missing money" problem, therefore an analysis follows examining the incentives given to the market participants. The analysis shows the dependence of the mechanism on mainly two factors: the over/under-capacity of the market and the strategic behavior of the market participants, especially of the incumbent. In general, the Capacity Adequacy Mechanism is expected to operate quite satisfactory, giving the "right" incentives to the market participants. Some minor amendments to the rules are proposed, aiming to further increase its efficiency.

An Ex-Post Assessment of RES-E Support in Greece by Investigating the Monetary Flows and the Causal Relationships in the Electricity Market

“…Each generator could reach an agreement with IPTO to acquire a fund equivalent to the available capacity of the CAT multiplied by a noncompliance penalty value (P ), when the generator was unavailable in the DAS market. As a result, the payment that was received by a generator j was equal to [49,50]: Over the period under study, compensation for the electricity produced from conventional generators was equal to the SMP, as derived from the day-ahead scheduling (DAS) market. During DAS, price bids made were firm, exposing generators to a penalty payment, if they did not comply with the delivery, equal to the ex-post imbalance price.…”

“…Each generator could reach an agreement with IPTO to acquire a fund equivalent to the available capacity of the CAT multiplied by a noncompliance penalty value (P NCP ), when the generator was unavailable in the DAS market. As a result, the payment that was received by a generator j was equal to [49,50]:…”

Design of a Scarcity Pricing Mechanism for Electricity Market Based on Price Increment Pattern

“…such as centralized capacity markets [1], reliability option auctions [2], decentralized capacity obligations [3], fixed capacity compensation [4], strategic reserve mode [5], and scarcity pricing [6], based on the typical international practice of capacity adequacy mechanism, but these studies only introduce the principles and overall framework of related mechanism designs abroad. References [7][8] have designed new capacity market mechanisms and capacity compensation mechanisms suitable for China's power system, respectively, proposing mechanism design schemes for market operating economic efficiency, energy transition needs and other objectives. However, these studies cannot simultaneously meet the requirements of capacity adequacy and system flexibility.…”

An overview of Greece's wholesale electricity market with emphasis on ancillary services

“…In case a load representative does not cover his obligations, he is charged with a Non Compliance Penalty for the part-not-covered contracts. A detailed description of this mechanism can be found in [1,4] and is beyond the scope of this paper. Similar capacity markets are run by other ISOs worldwide, such as ISO New England, New York, and PJM.…”