Energy Capacity Markets

The EU Commission and the Agency for the Cooperation of Energy Regulators are looking at options on how best to reward generation adequacy and flexibility in the power markets given the challenges brought by the European policy of moving towards a low carbon society.

Background

Several factors have prompted policymakers to open the conversation on generation adequacy and the need to introduce capacity markets in Europe: (i) the increased share of intermittent renewable energy in the energy mix of most member states, (ii) the effects of gradually phasing out conventional power plants following the implementation of the Large Combustion Plant Directive and the Industrial Emissions Directive, (iii) the nuclear phase-outs or restrictions to build new nuclear, and (iv) stricter standards for building new power. All these factors have caused conventional power plants difficulties in securing reasonable profitability, which in the longer term can seriously harm