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dc.contributor.authorTeirilä, J.
dc.contributor.authorRitz, Robert
dc.date.accessioned2018-12-07T15:00:39Z
dc.date.available2018-12-07T15:00:39Z
dc.date.issued2018-10-30
dc.identifier.otherCWPE1863
dc.identifier.urihttps://www.repository.cam.ac.uk/handle/1810/286486
dc.description.abstractThe transition to a low-carbon power system requires growing the share of generation from (intermittent) renewables while ensuring security of supply. Policymakers and economists increasingly see a capacity mechanism as a way to deal with this challenge. Yet this raises new concerns about the exercise of market power by large players via the capacity auction. We present a new modelling approach that captures such strategic behaviour together with a set of ex ante empirical estimates for the new Irish electricity market design (I-SEM) – in which a single firm controls 44% of generation capacity (excluding wind). We find significant costs of strategic behaviour, even with new entry: In our baseline scenarios, procurement costs in the capacity auction are around 150-400 million EUR (or 40-100%) above the competitive least-cost solution. From a policy perspective, we also examine how market power can be measured and mitigated through auction design.
dc.publisherFaculty of Economics
dc.relation.ispartofseriesCambridge Working Papers in Economics
dc.rightsAll Rights Reserveden
dc.rights.urihttps://www.rioxx.net/licenses/all-rights-reserved/en
dc.subjectcapacity market
dc.subjectstrategic behaviour
dc.subjectcompetitive benchmark analysis
dc.subjectrestructured electricity market
dc.subjectauction design
dc.titleStrategic behaviour in a capacity market? The new Irish electricity market design
dc.typeWorking Paper
dc.identifier.doi10.17863/CAM.33796


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