Cross-border effects of capacity mechanisms in interconnected power systems

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Utilities Policy, ISSN: 0957-1787, Vol: 46, Page: 33-47

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Pradyumna C. Bhagwat; Jörn C. Richstein; Emile J.L. Chappin; Kaveri K. Iychettira; Laurens J. De Vries
Elsevier BV
Business, Management and Accounting; Social Sciences; Environmental Science
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article description
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.