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Project information

Capacity payment mechanism for the Russian power market: Reliability options with a single strike price

March 2005 - April 2005

Funding entity Mercados Energéticos

In the context of the project «Consulting services for development of capacity payments mechanisms in Russia» develop by Mercados Enérgéticos for RAO UESR of the Russian Federation,
This capacity mechanism proposes to establish an organized market where the regulator requires the Market or the System Operator to buy a prescribed volume of reliability contracts from generators on behalf of the whole demand. These reliability contracts allow the consumers to obtain a price cap on the market price in exchange for a fixed remuneration for the generators. Additionally, the consumers obtain a satisfactory guarantee that there will be enough available generation capacity whenever it is needed; otherwise the generators will be penalized. The generators are also compensated economically for this service; the higher the contribution to the reliability of the system, the higher the compensation will be.