AbstractThe increasing share of renewables in generation leads to a structural change in electricity markets. As the utilization of conventional generators decreases in the short run, fixed costs of those power plants have to be recovered through high price spikes in times of scarce capacities. Moreover, for the longer run, given the technological peculiarities of power supply, the price spikes may not be strong enough to induce adequate capacity investments to ensure an efficient level of supply security. A solution may be to complement the energy-only markets by capacity markets. The latter provide revenues not only for the electricity actually sold but also for available capacity in order to reduce the utilisation risk, in particular for peak load plants that may be dispatched only for a small fraction of the time. Such an approach requires substantial reform of market design though.
Forecasting Price Spikes in Electricity Markets