Explaining the Capacity Market | The Energy Collective

See on Scoop.itGreen Energy Technologies & Development

There is a difference between energy and capacity, and power plants are compensated for both because both are important to maintaining the electrical system in different ways.

Duane Tilden‘s insight:

>[…] If the clearing price in the Incremental Auction comes in at $130 per MW, the coal plant has (oddly enough) made $20 per MW. This is because they got $150 for something that someone else is now going to do for them for only $130.

 

The other story here is that in capacity markets, lower cost resources can have the effect of suppressing prices for all of the resources since they ensure that demand can be met at a lower cost. For utilities who own lots of expensive generation, this is bad for business. […]

 

Capacity markets are important. They are the firing line for the electricity system of the future, because they direct and encourage investments in different kinds of assets—whether that is clean energy, fossil fuels, or demand side resources like efficiency. […]<

See on theenergycollective.com

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