There has been total unanimity about the vital importance of reliability of supply since the beginning of the electricity sector deregulation process. This paper describes the procedure proposed by Pérez-Arriaga et al. [2005. White paper for the reform of the regulatory scheme of the power generation in Spain. For the Ministry of Industry, Tourism and Trade of Spain (in Spanish)] to improve upon the current scheme to guarantee a reasonable reserve margin, the capacity payment mechanism. This alternative design introduces improvements aimed at guaranteeing at least a minimum capacity reserve margin, as well as at providing a strong incentive for generating units to be available when needed, namely, in situations when supply is likely to be insufficient to meet the total demand.
Keywords: Electricity restructuring; Electricity markets regulation; Security of supply
Energy Policy. Volume: 35 Issue: 9 Pages: 4545-4554
Journal Impact Factor: JCR impact factor 4.140 (2016)
DOI reference: 10.1016/j.enpol.2007.04.002
Published on paper: September 2007.