Capacity Mechanisms in the EU Energy Markets: Law, Policy, and Economics

Capacity remuneration mechanisms (or capacity mechanisms) have become a fact of life in member states' energy markets and are a hot topic in the wider European regulatory debate. This second edition will take stock of how they have worked so far and consider the consequences they have for the European internal electricity market. It will provide a detailed overview of national capacity mechanisms, their implications for the EU internal market, and outline the nature of market failures which are likely to occur.

Format: Hardback
Length: 512 pages
Publication date: 27 October 2022
Publisher: Oxford University Press

In the realm of energy markets within member states, capacity remuneration mechanisms, often referred to as capacity mechanisms, have emerged as a pervasive reality. These mechanisms have gained significant attention and are at the forefront of the broader European regulatory discourse. Concerned about ensuring the security of electricity supply, national governments are implementing subsidy schemes to incentivize investment in conventional power generation capacity, alongside already heavily subsidized renewable energy sources. With the interconnectedness of European electricity markets growing, the introduction of a capacity mechanism in one country not only affects its national market but can also have unforeseen implications for neighboring markets. Given the lack of effective supra-national coordination and consideration for cross-border impacts, these mechanisms often lead to severe market distortions and pose a significant threat to the future of the European internal electricity market.

To address these challenges, this second edition of the book aims to provide a comprehensive assessment of how capacity mechanisms have functioned to date and their implications for the European internal electricity market. It will offer a detailed overview of national capacity mechanisms, their impact on the EU internal market, and identify the potential market failures that may arise in the European electricity markets. This edition serves as a valuable reference for regulators and policy-makers seeking to design optimal capacity mechanisms in Europe. It will be an indispensable resource for individuals interested in energy market design, regulation, and competition issues.

In conclusion, capacity remuneration mechanisms have become an integral part of the energy landscape in member states. While they aim to address security concerns and promote investment, their implementation without proper coordination and consideration of cross-border impacts can lead to severe market distortions and jeopardize the future of the European internal electricity market. By examining the past and present experiences with capacity mechanisms, this edition provides valuable insights for policymakers and regulators to design effective and sustainable capacity mechanisms that support the development of a competitive and resilient energy system.

Weight: 1014g
Dimension: 179 x 254 x 34 (mm)
ISBN-13: 9780192849809
Edition number: 2 Revised edition