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dc.contributor.authorKeppler, Jan-Horst*
dc.date.accessioned2017-07-10T15:45:38Z
dc.date.available2017-07-10T15:45:38Z
dc.date.issued2017
dc.identifier.issn0301-4215
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/16597
dc.language.isoenen
dc.subjectElectricity markets
dc.subjectCapacity remuneration mechanisms
dc.subjectVOLL pricing
dc.subjectInvestment
dc.subjectSecurity of supply externalities
dc.subjectAsymmetric investment incentives
dc.subject.classificationjelQ.Q1.Q11en
dc.subject.classificationjelL.L1.L16en
dc.subject.classificationjelQ.Q4.Q43en
dc.subject.classificationjelL.L9.L94en
dc.titleRationales for Capacity Remuneration Mechanisms: Security of Supply Externalities and Asymmetric Investment Incentives
dc.typeArticle accepté pour publication ou publié
dc.description.abstractenEconomics so far provides little conceptual guidance on capacity remuneration mechanisms (CRM) in deregulated electricity markets. Ubiquitous in real-world electricity markets, CRMs are introduced country by country in an ad hoc manner, lacking the theoretical legitimacy and the conceptual coherence enabling comparability and coordination. They are eyed with suspicion by a profession wedded to a theoretical benchmark model that argues that competitive energy-only markets with VOLL pricing provide adequate levels of capacity. While the benchmark model is a consistent starting point for discussions about electricity market design, it ignores the two market failures that make CRMs the practically appropriate and theoretically justified policy response to capacity issues. First, energy-only markets fail to internalize security-of-supply externalities as involuntary curbs on demand under scarcity pricing generate social costs beyond the private non-consumption of electricity. Second, when demand is inelastic and the potential capacity additions are discretely sized, investors face asymmetric incentives and will underinvest at the margin rather than overinvest. After presenting the key features of the theoretical benchmark model, this paper conceptualizes security of supply externalities and asymmetric investment incentives and concludes with some consideration regarding design of CRMs.
dc.relation.isversionofjnlnameEnergy Policy
dc.relation.isversionofjnlvol105
dc.relation.isversionofjnldate2017
dc.relation.isversionofjnlpages562-570
dc.relation.isversionofdoi10.1016/j.enpol.2016.10.008
dc.relation.isversionofjnlpublisherIPC Science and Technology Press
dc.relation.forthcomingnonen
dc.relation.forthcomingprintnonen
dc.description.ssrncandidatenon
dc.description.halcandidateoui
dc.description.readershiprecherche
dc.description.audienceInternational
dc.relation.Isversionofjnlpeerreviewedoui
dc.date.updated2017-07-19T14:07:04Z
hal.person.labIds256094*
hal.identifierhal-01609383*


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