Expert survey on capacity markets in the US: Lessons for the EU

• Published in: Utilities policy Vol. 38; pp. 11 - 17
• Main Authors: Bhagwat, Pradyumna C., de Vries, Laurens J., Hobbs, Benjamin F.
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01-02-2016
• Subjects: Adequacy policy; Capacity; Capacity markets; Economics; Electric power; Electricity markets; Electricity networks; Energy economics; Energy industry; Europe; Imports; Markets; Neighbouring; Policies; Pricing; United States; Utilities; Capacity markets; Electricity networks; Adequacy policy; Electricity markets
• ISSN: 0957-1787; 1878-4356
• DOI: 10.1016/j.jup.2015.11.005

We present a survey of US capacity market experts with the purpose of drawing lessons for the EU. Of the respondents, 41% advised EU member states against implementing capacity markets, while the remaining were neutral or provided suggestions for improving capacity markets. Cross-border effects are currently not a concern but may become so in the future. Imports may dampen prices in a capacity market, but neighbouring markets may also experience pressure to implement a capacity market. The capacity markets in the USA were believed to have achieved their goals with respect to reliability, but in an economically inefficient manner.
•Survey of experts on US capacity markets.•Use of energy-only markets over capacity markets is recommended for the EU.•Cross-border effects are not a concern but may become so in the future.•US capacity markets have achieved their goals, but inefficiently.