To ensure sufficient investment in electricity generation capacity, mechanisms such as strategic reserves are being considered or already implemented. We analyze the effectiveness of a strategic reserve in the presence of a growing portfolio share of renewable energy sources (RES) with EMLab-Generation, an agent-based electricity market model. A strategic reserve can stabilize investment, but within limits. Uncertainty regarding future demand may cause the market to become instable, potentially leading to periods with very high electricity prices. In the presence of a large share of variable renewable energy sources, the reserve design should be adjusted or replaced by an alternative capacity mechanism.

Original languageEnglish
Pages (from-to)13-28
Number of pages16
JournalUtilities Policy: strategy, performance, regulation
Publication statusPublished - 1 Apr 2016

    Research areas

  • Agent-based modeling, Capacity mechanisms, Strategic reserve

ID: 5689399