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.
CITATION STYLE
Bhagwat, P. C., Richstein, J. C., Chappin, E. J. L., Iychettira, K. K., & De Vries, L. J. (2017). Cross-border effects of capacity mechanisms in interconnected power systems. Utilities Policy, 46, 33–47. https://doi.org/10.1016/j.jup.2017.03.005
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