Holmberg, Pär; Ritz, Robert A. - 2019 - This version: 29 June 2019
debated. In this paper, we introduce a new benchmark model of a capacity mechanism in a competitive electricity market with …-merit plant. We obtain a rationale for a capacity mechanism based on the internalization of a system-cost externality - even where … need for a capacity mechanism, and outline an optimal design of a strategic reserve with a discriminatory capacity payment. …