Definitions
A market-based energy system that is sufficiently interconnected should create incentives necessary for investments in security of electricity supply (European Parliament Research Service (EPRS) 2017). Such a market should yield economically; a very effective outcome, as it is needful for an interaction to exist between generation and market adequacy (Arne van Stiphout et al. 2017). Generation capacity available in any power system determines the level of blackout that will be experienced or not, as the incentive to include new generation is dependent on what is paid during the blackout resulting from market failures. The purpose of capacity mechanism is thus to resolve potential distortions emerging from market inadequacies (Höschle et al. 2017).
Capacity mechanisms can therefore be defined as instruments used in deregulated markets to ensure available generated capacity for peak demand reliability and...
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Oranye, N., Alabi, A. (2020). Effectiveness of a Priced Based Mechanism: Comparative Analysis of Price Based and Quantity Based Mechanisms. In: Leal Filho, W., Azul, A., Brandli, L., Özuyar, P., Wall, T. (eds) Affordable and Clean Energy. Encyclopedia of the UN Sustainable Development Goals. Springer, Cham. https://doi.org/10.1007/978-3-319-71057-0_24-1
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