Addressing Adequacy Concerns with Contracts: Review of Past, Present and Possible Future

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    Abstract

    Several papers propose using call options (i.e. a contract to sell energy at a pre-determined price in the future) as a mechanism to insure new investments and adequate capacity in electricity markets. Other papers have since extended on this idea. However, it is cumbersome for newcomers to get an overview of these capacity remuneration mechanism efforts, chiefly because the papers use different names (“reliability options”, “option contracts” and “forward reliability markets” to name a few) for what is the same mechanism in its basic form. This paper provides a review of these papers, presents an intuitive introduction to the basic underlying mechanism, and highlights the differences between the various approaches. In addition, this paper points out where the future research of this topic might be heading.
    Original languageEnglish
    Title of host publicationProceedings of the 2018 15th International Conference on the European Energy Market (EEM)
    Number of pages6
    PublisherIEEE
    Publication date2018
    Pages1-6
    DOIs
    Publication statusPublished - 2018
    Series2018 15th International Conference on the European Energy Market (eem)
    ISSN2165-4093

    Keywords

    • Call Options
    • Reliability Contracts
    • Option Contracts
    • Reliability Options
    • Backstop Call Option Obligations
    • Forward Reliability Market
    • Capacity Remuneration Mechanism
    • Adequacy
    • Literature Review

    Cite this

    Sekamane, J. K. (2018). Addressing Adequacy Concerns with Contracts: Review of Past, Present and Possible Future. In Proceedings of the 2018 15th International Conference on the European Energy Market (EEM) (pp. 1-6). IEEE. 2018 15th International Conference on the European Energy Market (eem) https://doi.org/10.1109/EEM.2018.8469970