Capacity remuneration mechanisms: Regulatory tools for sustaining thermal power plants and the eu energy transition

Abstract

Liberalisation of the European Union electricity markets has produced a range of challenges with regards to ensuring generation adequacy. Energy Transition, the impact of which has become increasingly felt in recent years, further complicates the issue of generation adequacy in the EU. For instance, on the one hand, increasing role of intermittent renewable energy sources (RESs) in electricity markets as the essential component of Energy Transition has a profound impact on the market profitability of Thermal Power Plants (TPPs). On the other hand, it is a well-known fact that TPPs maintain their importance due to the high amount of flexibility they can provide, which is particularly true for gas power plants. Based on these truths, this chapter aims to reveal how Capacity Remuneration Mechanisms (CRMs) may balance between Energy Transition and generation adequacy concerns in the EU. In this sense, this chapter chases the question of what the role of CRMs is to sustain TPPs and, hence, Energy Transition. © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020.