Cross-border effects of capacity mechanisms in interconnected power systems

Pradyumna C. Bhagwat; Jörn C. Richstein; Emile J.L. Chappin; Kaveri K. Iychettira; Laurens J. De Vries

doi:10.1016/j.jup.2017.03.005

Cross-border effects of capacity mechanisms in interconnected power systems

Pradyumna C. Bhagwat^*, Jörn C. Richstein, Emile J.L. Chappin, Kaveri K. Iychettira, Laurens J. De Vries

^*Corresponding author for this work

Energy and Industry

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Abstract

The cross-border effects of a capacity market and a strategic reserve in interconnected electricity markets are modeled using an agent-based modeling methodology. Both capacity mechanisms improve the security of supply and reduce consumer costs. Our results indicate that interconnections do not affect the effectiveness of a capacity market, while a strategic reserve is affected negatively. The neighboring zone may free ride on the security of supply provided by the zone implementing a capacity mechanism. However, a capacity market causes crowding out of generators in the energy-only zone. A strategic reserve implemented by this region could aid in mitigating this risk.

Original language	English
Pages (from-to)	33-47
Number of pages	15
Journal	Utilities Policy: strategy, performance, regulation
Volume	46
DOIs	https://doi.org/10.1016/j.jup.2017.03.005
Publication status	Published - 2017

Keywords

Capacity market
Cross-border effect
Strategic reserve

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10.1016/j.jup.2017.03.005

1-s2.0-S0957178716300832-mainFinal published version, 1.7 MBLicence: CC BY

Cite this

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title = "Cross-border effects of capacity mechanisms in interconnected power systems",

abstract = "The cross-border effects of a capacity market and a strategic reserve in interconnected electricity markets are modeled using an agent-based modeling methodology. Both capacity mechanisms improve the security of supply and reduce consumer costs. Our results indicate that interconnections do not affect the effectiveness of a capacity market, while a strategic reserve is affected negatively. The neighboring zone may free ride on the security of supply provided by the zone implementing a capacity mechanism. However, a capacity market causes crowding out of generators in the energy-only zone. A strategic reserve implemented by this region could aid in mitigating this risk.",

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AU - Bhagwat, Pradyumna C.

AU - Richstein, Jörn C.

AU - Chappin, Emile J.L.

AU - Iychettira, Kaveri K.

AU - De Vries, Laurens J.

PY - 2017

Y1 - 2017

N2 - The cross-border effects of a capacity market and a strategic reserve in interconnected electricity markets are modeled using an agent-based modeling methodology. Both capacity mechanisms improve the security of supply and reduce consumer costs. Our results indicate that interconnections do not affect the effectiveness of a capacity market, while a strategic reserve is affected negatively. The neighboring zone may free ride on the security of supply provided by the zone implementing a capacity mechanism. However, a capacity market causes crowding out of generators in the energy-only zone. A strategic reserve implemented by this region could aid in mitigating this risk.

AB - The cross-border effects of a capacity market and a strategic reserve in interconnected electricity markets are modeled using an agent-based modeling methodology. Both capacity mechanisms improve the security of supply and reduce consumer costs. Our results indicate that interconnections do not affect the effectiveness of a capacity market, while a strategic reserve is affected negatively. The neighboring zone may free ride on the security of supply provided by the zone implementing a capacity mechanism. However, a capacity market causes crowding out of generators in the energy-only zone. A strategic reserve implemented by this region could aid in mitigating this risk.

KW - Capacity market

KW - Cross-border effect

KW - Strategic reserve

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DO - 10.1016/j.jup.2017.03.005

M3 - Article

AN - SCOPUS:85016390364

SN - 0957-1787

VL - 46

SP - 33

EP - 47

JO - Utilities Policy: strategy, performance, regulation

JF - Utilities Policy: strategy, performance, regulation

ER -

Cross-border effects of capacity mechanisms in interconnected power systems

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Keywords

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