Book contents
- Electricity Capacity Markets
- Electricity Capacity Markets
- Copyright page
- Contents
- Figures
- 1 Introduction
- 2 Capacity Markets Primer
- 3 Restructured Electricity Markets and Regional Transmission Organizations
- 4 Reliability and the Missing Money Problem
- 5 Capacity Policies
- 6 First-Generation Capacity Markets
- 7 Second-Generation Capacity Markets
- 8 Capacity Market Demand
- 9 Capacity Market Supply
- 10 Capacity Market Design
- 11 Market Power
- 12 Minimum Offer Price Rules
- 13 The Texas Alternative
- 14 Conclusion
- Index
- References
4 - Reliability and the Missing Money Problem
Published online by Cambridge University Press: 24 February 2022
Book contents
- Electricity Capacity Markets
- Electricity Capacity Markets
- Copyright page
- Contents
- Figures
- 1 Introduction
- 2 Capacity Markets Primer
- 3 Restructured Electricity Markets and Regional Transmission Organizations
- 4 Reliability and the Missing Money Problem
- 5 Capacity Policies
- 6 First-Generation Capacity Markets
- 7 Second-Generation Capacity Markets
- 8 Capacity Market Demand
- 9 Capacity Market Supply
- 10 Capacity Market Design
- 11 Market Power
- 12 Minimum Offer Price Rules
- 13 The Texas Alternative
- 14 Conclusion
- Index
- References
Summary
Capacity markets are created to ensure that restructured electricity markets provide reliable service. Reliability requires that generation capacity in electricity markets is adequate to meet demand at all times, including during periods of peak usage. In a typical market, the reliability of supply is left to buyers and sellers to resolve through their transactions. Electricity markets, however, have their peculiarities. In particular, the missing money problem is a theory contending that features specific to electricity markets distort incentives for investment in generation capacity, impairing reliability. Potential sources of these distorted incentives include inelastic demand and supply, price caps, system reliability as a public good, the use of engineering-based reliability standards, and system operations. Missing money theories provide the general rationale for policies seeking to enhance the supply of capacity in electricity markets. Each of the potential causes of missing money has generated both support and critique and may have different implications for policy.
- Type
- Chapter
- Information
- Electricity Capacity Markets , pp. 37 - 53Publisher: Cambridge University PressPrint publication year: 2022
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