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Bhagwat, Pradyumna C.
Richstein, Jörn C.
Chappin, Emile J.L.
Iychettira, Kaveri K.
Vries, Laurens J. De
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[Journal:] Utilities Policy [Volume:] 46 [Pages:] 33-47 [ISSN:] 0957-1787
The cross-border effects of a capacity market and a strategic reserve in interconnected electricity markets are modeled using an agent-based modeling methodology. Both capacity mechanisms improve the security of supply and reduce consumer costs. Our results indicate that interconnections do not affect the effectiveness of a capacity market, while a strategic reserve is affected negatively. The neighboring zone may free ride on the security of supply provided by the zone implementing a capacity mechanism. However, a capacity market causes crowding out of generators in the energy-only zone. A strategic reserve implemented by this region could aid in mitigating this risk.
Capacity market
Cross-border effect
Strategic reserve
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