Assessing impacts of capacity mechanism on long-term market equilibrium

作者：Han Choong Kyo; Hur Don^*; Sohn Jin Man; Park Jong Keun

来源：European Transactions on Electrical Power, 2010, 20(2): 218-230.

DOI：10.1002/etep.306

• generation adequacy
• capacity mechanism
• generation investment
• expected utility theory
• long-term market equilibrium

It has long been presumed that the electricity market can provide the correct economic signal for the investment of new generation. However, in response to concerns over the reasonableness of an investment signal in the energy-only electricity market, various designs of capacity mechanisms have been proposed to solve the adequacy problem. In this paper, we focus on analyzing the influence of capacity mechanisms on the long-term market equilibrium in the electricity market. Three market models are considered: a price-spike model, a capacity payment model, and a capacity demand curve model. The long-term market equilibrium in each market model is calculated through load duration, price duration, net revenue, and generation investment models. To consider the generation companies' investment behavior when the profit contains uncertainties, different utility functions representing their risk attitude is introduced. This paper presents the sensitivity of the risk components such as the change of the generation companies' risk attitude, the forced outage rate, the error of the forecasted peak load, and the load factor. The performance of each market model has been compared, which would come to the conclusion that when the electricity market does not have enough demand response and the ability to remove the abuse of market power, as transitional measures, it is necessary to adopt the capacity demand curve model even though it is not market-based approach and has the drawback that the performance depends on the shape of the capacity demand curve and market conditions.

• 出版日期2010-3