IAEE Energy Forum / Third Quarter 2019 Transition to a Capacity Auction: a Case Study of Ireland BY EWA LAZARCZYK AND LISA RYAN Introduction small size of the all-island Ewa Lazarczyk is with electricity market, the relatively the School of Business, Modern electricity markets are characterized Reykjavik University. Lisa high share of intermittent by increasing shares of intermittent production Ryan is with the School renewables, and the limited which has almost zero marginal costs. The effect of of Economics and Energy amount of interconnector introducing large amounts of cheap power into the Institute, University capacity, leading to a system is known as the merit order effect – a shift College Dublin. Lazarczk vulnerability to outages. may be reached at of a supply curve to the right which delivers lower The European Commission
[email protected] equilibrium prices. The lower prices and the fact that (2016) distinguishes between fossil-fuel generators are used less often exacerbate See footnotes at two types of Capacity adequacy problems – there is a threat that not enough end of text. Remuneration Mechanisms: generating capacity will be available in the system since volume- and price-based. Bublitz et al. (2019) provide generators´ revenues are low and investment needs a description of generic types of CRM and give an are not met. This and the fact that energy markets are overview which solutions are used around the world. often capped in order to prevent market power leads They distinguish six types of mechanisms: tender to the so called “missing money problem” (Teirila and for new capacity, strategic reserve, targeted capacity Ritz, 2018, Bublitz et al., 2019).