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Dual Capacity Price Mechanism to Provide Stable Remuneration for Generation Capacity
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 Title & Authors
Dual Capacity Price Mechanism to Provide Stable Remuneration for Generation Capacity
Kim, Yung San;
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Achieving the two goals of providing stable remuneration and promoting market based incentive for generation capacity with only one kind of capacity price is a difficult proposition. This paper suggests a market design in which two different kinds of capacity prices are used to achieve these goals. It maintains the current capacity price that is determined administratively based on the fixed cost of the gas-turbine generator. A second capacity price is added that covers generators with higher fixed costs and lower fuel costs such as combined-cycle gas turbine, coal-powered, and nuclear generators. This second capacity price is conditional on a lower energy price ceiling and determined by the interaction of the market supply and a demand schedule derived from the optimal fuel mixed principle.
Wholesale electricity market;Capacity price;Cost Based Pool;
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