Tuesday, September 13, 2011

Capacity Markets in a Intermittent Supply World

BNE Paper on Capacity Market Calls for New Flexible Gas-Fired Power Plants « German Energy Blog:
An energy market is needed which gives incentives for the best generating capacities from an energy policy point of view, as well as the economically most favourable ones, bne says. The paper from by Büro für Energiewirtschaft und technische Planung GmbH (BET) points out ways to achieve this goal. The concept involves an auctioning model with a market-coordinator who assesses whether there is the necessary capacity to ensure the security in supply.

 I anticipated a move to capacity markets.  Last week I replied to a question on a BNC thread as to claims wind subsidies were recovered by the populace through the added wind supply bringing market prices down:
"...we know that supply has been added, and it sounds like the supply that has been added cannot displace existing capacity, which exists to meet the peak demand wind is expected to be absent for. Adding any supply quicker than demand is increasing will lower prices.
So here is where that takes the market. You lower one market price by creating other markets. Nobody is going to invest in a plant to meet only the capacity of peak periods when they only have a market when the wind isn’t blowing and demand is there. In the US and Europe, there is increasing discussion of capacity markets" 
The capacity market is likely to be joined by a market for withdrawing supply during high wind, or sunny, periods, too, as suggested by the C.D. Howe Institute recommending, for Ontario, a 
" ...new market mechanism that would facilitate payments to generators, who operate under fixed-price contracts, to reduce output when doing so would save money for the system as a whole."
Add to this, possibly, a market for 'renewables' such as established by Renewable Portfolio standards, and a carbon market, and it is possible to see this getting unwieldy!

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