Capacity mechanisms in the context of the single market

Due to increasing shares of intermittent RES-E the need for (rarely used) generation capacity will increase in Europe. In addition, investments in generation capacity might also have to increase because of low investments after the liberalisation. To incentivice the necessary investments many European electricity markets have implemented or intend to implement capacity mechanisms. Instead of discussing the need for capacity mechanisms per se we addressed two implementation issues: (1) As market integration is currently mainly focused on energy-only markets there is growing concern that incompatible capacity mechanisms might put the development of the single market into peril. (2) Some observers see technology specific capacity mechanisms as a tool of decarbonizing the power plant fleet and increasing security of supply. Thus, we discussed how to reconcile national capacity mechanisms with the single market and whether there is a case for technology specific capacity mechanisms.

Participants to the event included Philippe Chauve (DG Comp, European Commission), Meg Gottstein (RAP), Stephen Benians (RAP), Per Agrell (UCL), Yves Smeers (UCL), Georg Zachmann (Bruegel)