Generation Adequacy in Europe: A Decision Framework

L.J. de Vries and R.A. Hakvoort (The Netherlands)


Generation adequacy, investment, capacity mechanism, option.


In response to increasing concerns about the possibility of investment cycles in liberalized electricity markets, a number of capacity mechanisms have been suggested in order to stabilize the volume of generating capacity. This paper presents a framework for policy makers to select an appropriate capacity mechanism to implement. None of the available options, however, meet the requirements for implementation in an interconnected, bilateral market, such as most European countries have. The paper discusses some possible adjustments to existing capacity mechanisms to suit this particular (but common) case. The paper ends with an overview of some dilemmas that are to be taken into account by policy makers with respect to the issue of generation adequacy and the implementation of a capacity mechanism.

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