Investment vs. Refurbishment: Examining Capacity Payment Mechanisms Using Stochastic Mixed Complementarity Problems

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Title: Investment vs. Refurbishment: Examining Capacity Payment Mechanisms Using Stochastic Mixed Complementarity Problems
Authors: Lynch, Muireann Á.Devine, Mel T.
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Date: 1-Apr-2017
Online since: 2019-08-27T07:18:09Z
Abstract: Capacity remuneration mechanisms exist in many electricity markets. Capacity mechanism designs do not explicitly consider the effects of refurbishment of existing generation units in order to increase their reliability. This paper presents a stochastic mixed complementarity problem to examine the impact of refurbishment on electricity prices and generation investment. Capacity payments are found to increase reliability when refurbishment is not possible, while capacity payments and reliability options yield similar results when refurbishment is possible. Final costs to consumers are similar under the two mechanisms with the exception of the initial case of overcapacity.
Funding Details: European Commission - European Regional Development Fund
Science Foundation Ireland
Type of material: Journal Article
Publisher: International Association for Energy Economics (IAEE)
Journal: The Energy Journal
Volume: 38
Issue: 2
Copyright (published version): 2017 the Authors
Keywords: Capacity marketsReliabilityMixed complementarity problemStochastic modelling
DOI: 10.5547/01956574.38.2.mlyn
Language: en
Status of Item: Peer reviewed
Appears in Collections:Electrical and Electronic Engineering Research Collection

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