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Article Title: Economic consequences of a capacity market implementation: The case of Poland
Specialization Codes: 11.2 - Economic Growth and Energy Demand, 13 - Energy Security and Geopolitics, 13.2 - Energy Security, 15 - Energy Modeling, 15.1 - Energy Data, Modeling, and Policy Analysis, 3.5 - Policy and Regulation, 6.10 - Policy and Regulation, 6.7 - Markets and Prices,
Authors: Aleksandra Komorowska, Pablo Benalcazar, Przemyslaw Kaszynski, Jacek Kaminski
Publication Date: 21 June 2020
Description: This paper investigates the potential economic consequences of setting up a capacity market in Poland. A computable model of the Polish power generation system is developed and employed to analyse the impact of this mechanism. Two scenarios are designed for this study: (i) a reference scenario that reflects the energy-only market and (ii) a capacity market scenario that assumes the implementation of such an instrument. To assess the economic consequences, the following parameters are estimated: (i) annual electricity prices, (ii) Loss Of Load Hours, (iii) Expected Energy Not Served, and only for the capacity market scenario: (iv) market clearing price, (v) total budget of the capacity market, and (vi) increase in electricity price due to the introduction of the capacity market. The findings of the study indicate that the long-term maintenance of the energy-only market results in higher electricity prices when compared to putting a capacity market into operation. Introducing a capacity market enables existing resources to be used effectively without excessive capital expenditure. The methods and conclusions presented in this paper provide valuable findings and policy insights regarding the potential economic consequences of a capacity mechanism in a power system mostly dominated by coal and undergoing an energy transition.
More Information: https://doi.org/10.1016/j.enpol.2020.111683

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