The Political Economy of Long-Term Generation Adequacy: Why an ICAP Mechanism is Needed as Part of Standard Market Design
✍ Scribed by Janet Gail Besser; John G. Farr; Susan F. Tierney
- Publisher
- Elsevier Science
- Year
- 2002
- Tongue
- English
- Weight
- 335 KB
- Volume
- 15
- Category
- Article
- ISSN
- 1040-6190
No coin nor oath required. For personal study only.
✦ Synopsis
Mechanism is Needed as Part of Standard Market Design
In theory, energy and ancillary services markets alone can provide incentives for investment in electricity supplies. However, they can only do this by subjecting consumers to price volatility, price levels, supply shortages, and a level of risk to reliability that customers and policymakers would ®nd unacceptable. If, given the political realities of the electricity market, prices lack the ability to move up and down as necessary to induce investment when capacity tightens, then an explicit capacity obligation is needed to signal capacity shortages (and surpluses) and induce investment when appropriate.