Analysis of capacity mechanisms in Europe

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Supervisor:
Dr. Vokony István
Department of Electric Power Engineering

The development of guidelines and legal background necessary for the creation of the European Energy Market began as early as 1996 on the release of the First Energy Package, which was followed by two additions in a short period of time. Despite the guidelines of the legislative packages the Energy-Only Markets (EOM) are still struggling with regulatory and fundamental deficiencies, which in the long run risk the cornerstones of the EU’s energy policy, the competitiveness, sustainability and the security of supply. A possible solutions to treat these shortcomings is implementing a capacity mechanism.

In my thesis I analyse the formation, its operation and the guidelines established to regulate the European energy market. The problems resulting from the regulations, the impact and consequences of supporting the renewable energy power plants, such as the transforming power plant portfolio and the creating of investment cycles, are also examined in a detailed manner.

In this paper I discussed in detail the types of capacity remuneration mechanisms found in the European Union Member States, highlighting their positive and negative aspects. I thoroughly analyse the important attributes of the mechanisms in 12 member states from the consumer point of view, such as the cost and the level of security supply.

Hungary’s power plant portfolio is going through changes which is a cause for concern. Based on the analysis of the composition and the transformation of the domestic power sector, the expected consumption growth in Hungary, and the lessons learned from the inspection of the EU member’s mechanism I propose the introduction of a capacity mechanism based on international examples.

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