Capacity mechanisms as a structural component of electricity markets

Speaker: Giuseppe Montesano, Head of European Regulation and Scenarios at ENEL

The bulk of incremental capacity expected to enter the electricity markets in the coming years corresponds to intermittent energy sources rather than firm ones and the business case for investment in new thermal capacity is facing lower levels of expected profitability, raising concerns over the actual materialisation of future investments and thus system adequacy. Electricity markets are not delivering adequate investment signals and security of supply, adequacy more specifically, may be undermined.

In light of such a context, the economic viability of some of the existing plants puts them at risk of early decommissioning or mothballing: such developments pose the challenge of ensuring sufficient capacity availability in both the short and long-term while ensuring adequate investment return rates in the market place for existing and future generation capacity.

Mr. Montesano will discuss the rationale of introducing capacity mechanisms as a structural component of electricity markets. The remuneration of capacity based on market mechanisms can be a means of guaranteeing the adequacy of power systems in an efficient way, especially in contexts in which high shares of generation are intermittent and at low or zero marginal cost.

It will be a pleasure to welcome our members at this event.