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Project information

Long term generation adequacy for the Dutch electricity market

July 2003 - October 2003

Funding entity Amsterdam Power Exchange

The objective of this project is the study of the feasibility of implementing a reliability options approach to the problem of security of supply in the Dutch electricity market, in particular from the viewpoint of the implications for the Power Exchange. Basically, the question is to determine whether a market-type regulation will be able to provide enough generation capacity in the system or not, and under which conditions an energy-only market will be enough to ensure system requirements for new investments under reasonable reliability standards.
One of the relevant procedures to deal with this problem is the realiabilty options method, where generators sell a certain amount of financial options and, by doing so, they commit to produce whenever prices rise over a certain reference level. Option-holder firms that fail to fulfill their commitment are heavily penalized. These options are allocated through an auction where each generator submit bids expressing the amount of power he is willing to sell and the price he requires for it. This project will consist of supporting the activity of an international consulting company that is preparing an adaptation of the reliability options method for the Amsterdam Power Exchange in The Netherlands.