Capacity Markets—Lessons Learned from the First Decade

Capacity markets were introduced in the U.S. in the late 1990s as a means to ensure “resource adequacy” in liberalized electricity markets where generation must be built by merchant investors rather than regulated entities. This paper provides a general introduction to these markets: why they exist,...

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Bibliographic Details
Published in:Economics of energy & environmental policy 2013-09, Vol.2 (2), p.1-26
Main Authors: SPEES, KATHLEEN, NEWELL, SAMUEL A., PFEIFENBERGER, JOHANNES P.
Format: Article
Language:English
Subjects:
Adequacy
Analysis
Auction markets
Auctions
Demand curves
Deregulation
Electric utilities
Electricity
Energy resources
Environmental policy
Market prices
Markets (Economics)
Miso
Natural resources
Supply
SYMPOSIUM ON ‘CAPACITY MARKETS’
United States
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Summary:Capacity markets were introduced in the U.S. in the late 1990s as a means to ensure “resource adequacy” in liberalized electricity markets where generation must be built by merchant investors rather than regulated entities. This paper provides a general introduction to these markets: why they exist, how they function, how well they have performed in their first decade of operation, and the current challenges they face. It shows that capacity markets can work to meet their objectives but will need to address various design challenges over the coming years.
ISSN:2160-5882
2160-5890
DOI:10.5547/2160-5890.2.2.1