Understanding the benefits of capacity mechanisms for social welfare [Promoted]

Understanding the benefits of capacity mechanisms for social welfare [Promoted]


A growing number of EU Member States have
set up Capacity Mechanisms in recent years, as a way of ensuring the investments that are
necessary for long term security of supply. Member States may introduce Capacity
Mechanisms to secure electricity supply and to prevent power shortages. And that’s obviously important
and completely legitimate. But the implications of capacity
mechanisms are equally important. Because they can affect electricity prices. They can give undue advantages
to certain energy operators and they can hinder energy
flows across EU borders. DG COMP has acknowledged the
need for capacity mechanisms to respond to specific supply security problems following the in-depth investigation
conducted in 11 Member States. In particular, market-based mechanisms
guarantee supply security at the best price. However, in trialogues, the European
Commission and the European Parliament want to make capacity mechanisms
a last resort in market design. But what effect would this have
on security of energy supply and the economic efficiency of electricity markets? Several studies and impact assessments
have been released on this topic but come to diverging conclusions. Some show that Capacity Mechanisms
are necessary and beneficial. While others studies say that they are distortive
and should only be used as a last resort. To better understand these differences RTE, France’s Transmission System Operator
and Europe’s leading electricity grid recently conducted an analysis of seven studies and conducted its own economic impact
assessment on the situation in France. What did we find? First, we found that existing studies which
find capacity mechanisms to be distortive are missing crucial factors. For example they assume that the cost of capital
is independent from the risk investors face. Secondly, we found that a properly
designed capacity mechanism which does not aim for overcapacity systematically leads to social welfare improvement. Our analysis of the situation in France, for
example, shows that a capacity market brings 140 million euros of additional
social welfare improvement, compared with a theoretical
perfect energy only market. Even if this was possible to achieve. If well designed, capacity markets
not only help Member States maintain a security of supply in a cost effective way but also facilitate the energy transition. Revenues stemming from capacity markets
for demand response are 5 times higher than revenues stemming from the energy market. While all consumers benefit from capacity
markets, active consumers feel a large benefit. Our conclusion is that capacity mechanisms
are an important tool to help Member States ensure security of supply in
the most cost efficient way. To learn more about our impact
assessment, visit our website.

3 thoughts on “Understanding the benefits of capacity mechanisms for social welfare [Promoted]

  1. Why would we want to be members of a "club" (EU) where we have NO say in the workings of that club? They can bring charges on us that we cannot appose bring laws to us that we have NO say in, and the leaders of said club are NOT EVEN elected.This is total madness to even consider, our way forward is clearly to leave the EU as fast as we can with NO more connection other than FAIR TRADE deals.The EU want to carve up OUR fishing waters for their "friends" and leave us the scraps off their plate, I don't think so, We can allow other country's to fish in OUR WATERS but only if they pay us for the privilege. They think they can use our off shore properties as bargaining chips AGAINST US, don't forget they are OUR PROPERTIES, not theirs to play with.Our PM insists on saying British armed forces will NOT be joining the EU army yet we already have our troops with EU badges on their uniforms, this has not been put to the British public.
    When will common sense step in? We need to be in charge of our own lives as all free people throughout the world are, big business manipulate our lives to a certain extent but that's our own stupid fault. We can choose to NOT purchase from them but we have NO choice with the EU, they want TOTAL CONTROL of us and I DONT THINK SO.Britain needs to unit as we did in the last war and not let anyone DIVIDE AND CONQUER US.
    If immigrants want to come here because of our welfare system STOP giving welfare untilthey have resided in BRITAIN for a minimum of FIVE YEARS, no voting rights until immigrants have resided for a minimum of TEN years and to get council housing they must go on council waiting lists like the rest of the population and wait their turn.

  2. The fact that the company is called RTE, with an Irish presenter, are you trying on purpose to be confused with the Irish state broadcaster that goes by the same name?

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