Capacity market analysis

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Dr. Vokony István
Department of Electric Power Engineering

In today’s modern, liberalised electricity markets more and more design flaws are becoming apparent, which can lead to market failures, uncertain investment environments and even shortages in some countries or regions. As reliable, uninterrupted electricity service is high priority for both industrial and residential consumers, it is important that market operators find adequate solutions to these issues. A possible approach is the introduction of capacity mechanisms, which gained much ground in the past 10-20 years. In my thesis, I analyse the operation of capacity mechanisms and look into the possibilities of a Hungarian capacity market.

Firstly, I present the current issues of electricity markets and the possible reasons behind them, then I introduce capacity mechanisms as a possible solution and describe several different versions of them. Secondly, I give an overview of existing or proposed capacity mechanisms all over the world and also mention opinions and experiences related to them. Then, I briefly present the current state and some proposals of the European regulatory environment concerning capacity markets.

Lastly, I analyse the Hungarian electricity market and its short- and long-term prospects, and finally present a dynamic model that uses estimated supply and demand data of the Hungarian market to predict the possible effects of different capacity mechanisms.


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