Thursday, August 23, 2012

Germany's Environmental Agency Rejecting Capacity Market, suggests strategic reserve instead

Germany's Environmental Agency is rejecting the concept of a capacity market in favour of a 'strategic reserve'

Capacity market or strategic reserve? - 100% renewable - Renewables International:
Renewable electricity – and solar power in particular – are cutting so much into the medium load that gas turbines increasingly do not run for enough hours to make them profitable. Renewables International has discussed the option of a capacity market, but last month the UBA spoke out against the concept, which it feels will provide too few incentives for demand management. Furthermore, the study believes that the creation of a capacity market would be "irreversible." UBA also warns that the discussion about capacity markets could "delay investments in new power plants."
Instead, the UBA proposes the creation of a strategic reserve "comparable with the strategic reserve for petroleum." 
Continue reading at Renewables International

In March 2011 I sent an e-mail off noting I thought I'd had an original thought on the use of a strategic reserve in an energy market, only to find the Nord Pool market already has a structure allowing a strategic reserve (some info in this .pdf).  I remain partial to the concept, particularly as market participants can be charged the cost of maintaining the reserve if the rules for when the reserve could be drawn upon were properly defined.
Aside from the capacity market (in my opinion PJM is probably the most successful example), the third choice is simply a market where peak prices are allowed to rise as high as the market dictates, thus providing the incentives for suppliers to maintain sufficient capacity (ie. ERCOT).

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