Reliability options: regulatory recommendations for the next generation of capacity remuneration mechanisms

P. Mastropietro, P. Rodilla, M. Rivier, C. Batlle

Energy Policy Vol. 185, pp. 113959-1 - 113959-13

Summary:

The policy and regulatory debate raised after the 2022 energy crisis has reaffirmed capacity remuneration mechanisms (CRMs) as a key element of the electricity market design required to drive the much-needed energy transition. Reliability options are a CRM product that effectively addresses the market failures impacting security of supply, while minimising the interference with the different segments of the energy market. This article provides a comprehensive and detailed assessment of the design elements of reliability options and advances recommendations that can be useful for regulators who may consider introducing this scheme in their electricity markets. The analysis benefits from lessons learned in those power sectors where reliability options have been implemented (Colombia, ISO New England, Ireland, Italy, and Belgium). This allows to narrow the gap between the theoretical debate and the real-world implementation of these mechanisms.

Spanish layman's summary:

Este artículo presenta una revisión detallada de los elementos de diseño de las opciones de fiabilidad y avanza recomendaciones que podrían ser útiles para aquellos reguladores que quieran introducir este mecanismo en su mercado eléctrico.

English layman's summary:

This article provides a comprehensive and detailed assessment of the design elements of reliability options and advances recommendations that can be useful for regulators who may consider introducing this scheme in their electricity markets.

 

Keywords: Reliability options; Capacity mechanisms; Capacity markets; Resource adequacy; Strike price; Financial hedge

JCR Impact Factor and WoS quartile: 9,000 - Q1 (2022)

DOI reference: https://doi.org/10.1016/j.enpol.2023.113959

Published on paper: February 2024.

Published on-line: December 2023.

Citation:
P. Mastropietro, P. Rodilla, M. Rivier, C. Batlle, Reliability options: regulatory recommendations for the next generation of capacity remuneration mechanisms. Energy Policy. Vol. 185, pp. 113959-1 - 113959-13, February 2024. [Online: December 2023]