Beyond capacity markets — Delivering capability resources to Europe's decarbonised power system

Abstract

A closer look at the new reliability challenges associated with meeting Europe's decarbonisation targets suggests that our collective thinking will need to evolve "beyond capacity markets" in order to address them. In particular, the power system will need resources capable of rapidly changing output or fexing demand frequently and continuously throughout the year around the energy availability from variable renewables. Based on these requirements and related considerations, we develop a set of market design principles that can be used to assess the suitability of proposals intended to deliver system reliability. The proposal to introduce a capacity payment mechanism being considered for Great Britain is reviewed against these criteria. Our analysis suggests that it will not be capable of meeting the system reliability challenges or taking advantage of emerging opportunities ahead.