Capacity Markets: A Bridge to Recovery?

Deck: 

A review of the ongoing evolution of market design.

Fortnightly Magazine - May 2005
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LICAP, ICAP, UCAP, NoCAP. Some markets have them, some don't. Where they do exist, no two are equal.

California was built without one, as were the markets of Australia and New Zealand. Northeastern U.S. markets all have them, albeit in slightly different variations. MISO will start one of the biggest energy markets in the world without one. PJM, long considered the model market, is debating a major overhaul to its current scheme. Others are considering such changes as well.

As the experimentation with wholesale energy market deregulation continues, an evolutionary trend in capacity market design is becoming apparent in the United States. Most critics now support the conclusion that energy only schemes in price-capped markets do not provide sufficient revenues to induce new generation and keep system-critical, high-cost generation resources in the market. As such, it is likely only a matter of time before energy only markets are extinct.

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