Capacity Mechanisms in Future Electricity Markets

Name: Hanspeter Höschle

Prof. dr. ir. Ronnie Belmans

Prof. dr. ir. Dirk Van Hertem

In most of today's electricity markets, the major share of income is based on the produced electricity, measured in energy (kWh). However, the ability to reliably produce when the demand is exceptionally high or wind and solar PV are not available is also very important. It might be that market participants like generators are hardly used throughout the year, but are vital at those rare moments. An adequate market framework ensures that market participants receive revenues for both their produced electricity as well as their availability. Capacity mechanisms are one proposed way to pay market participants for their availability, measured in capacity (kW). In fact, several capacity mechanisms with different working principles exist.

It is significant for market participants, consumers and policy makers to get a view on the interaction between those capacity mechanisms and existing markets. Understanding how these mechanisms drive investments in different technologies allows shaping the transition to a sustainable power system. This means reducing greenhouse gas emissions, but also ensure the quality of the electricity supply as well as the affordability for all consumers.

Modeling the investments of independent market participants and their reaction to a capacity mechanism is the goal of this doctoral research. The decision-making of market participants is translated into mathematical optimization problems which are then solved simultaneously in an equilibrium model. The results include, among others, the investments and market prices used to calculate consumer cost. The proposed model allows to look at capacity mechanisms from different perspectives. This ranges from a focused view on market participants which minimize their risk of losses to a wider European perspective where countries choose different mechanisms. As such, the findings of the work could be relevant input for potential European capacity mechanisms, or for strategies of participants in (future) electricity markets.

https://lirias.kuleuven.be/handle/123456789/613848

Prof. dr. ir. Ronnie Belmans (promotor) 
Prof. dr. ir. Dirk Van Hertem (promotor) 
Prof. dr. ir. Jean Berlamont (voorzitter/chairman) 
Prof. dr. ir. Erik Delarue (secretaris/secretary) 
De heer Leonardo Meeus 
Prof. dr. Wolf Fichtner , Karlsruhe Institute für Technology, Gebäude 06.33 (Uni-West) 
Prof. dr. Anthony Papavasiliou , Université catholique de Louvain