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LICAP and Its Lessons:
Fortnightly Magazine - January 2005
  • Benchmark Adjustment for Outages. In practice, EBCC for each zone will be 10 percent less than the nominal EBCC total, reflecting a benchmark standard forced outage rate.
  • 3. Calculate the LICAP prices as set through the monthly auction

  • Graph. Construct an x-y coordinate graph, with price on the y-axis expressed as a function of EBCC, and capacity quantity on the x-axis, as a function of OC.
  • Demand Curve. Draw a sloping demand curve (see figure). This curve represents an administrative determination of how much that LSE should be willing to pay to capacity suppliers, rather than a summation of actual bids submitted by LSEs.
  • Capacity Quantity. At each monthly auction, calculate the quantity of existing installed capacity for each zone on the x-axis. (This amount is a different value from the actual number and quantity of capacity supply bids submitted by suppliers - more on that later).
  • Corresponding Price. At that value of x (quantity), move up in vertical direction to find intersection with the demand curve. The corresponding value for y (a function of EBCC) will represent the nominal price of LICAP.- B.W.R.

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