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Reliability options: Can they deliver on their promises?
Bhagwata, Pradyumna C. Meeus, Leonardo
Bhagwata, Pradyumna C.
Meeus, Leonardo
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Publication Type
Journal article
Editor
Supervisor
Publication Year
2019
Journal
The Electricity Journal
Book
Publication Volume
32
Publication Issue
10
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Publication End page
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Abstract
Capacity mechanisms have been controversial in theory as well as practice. Lessons from experience with different capacity mechanisms led to the development of the reliability options. This mechanism promises two advantages over other types of capacity mechanisms. Firstly, it ensures the availability of capacity contracted via the capacity mechanism during scarcity. Secondly, the reliability option mechanism limits any energy market distortion due to its implementation and provides the consumer a hedge from high prices. We assess the ability of reliability options in delivering the two promises by analysing the reliability option designs in Italy and Ireland. We find that they deliver on the first promise but only partly on the second.
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Keywords
Adequacy Policy, Capacity Mechanisms, Reliability Options