Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129400
Authors: 
Lynch, Muireann Á.
Devine, Mel T.
Year of Publication: 
2015
Series/Report no.: 
ESRI Working Paper 507
Abstract: 
Capacity remuneration mechanisms exist in many electricity markets. Capacity mechanism designs do not explicitly consider the effects of refurbishment of existing generation units in order to increase their reliability. This paper presents a mixed complementarity problem with endogenous probabilities to examine the impact of refurbishment on electricity prices and generation investment. Capacity payments are found to increase reliability when refurbishment is not possible, while capacity payments and reliability options yield similar results when refurbishment is possible. Final costs to consumers are similar under the two mechanisms with the exception of the initial case of overcapacity.
Subjects: 
Capacity markets
Reliability
Mixed Complementarity Problem
Stochastic Modelling
JEL: 
Q4
D43
D47
L13
C61
Document Type: 
Working Paper

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