A Regional Approach to Resource Adequacy: The Participation of External Resources in Capacity Remuneration Mechanisms
The development of integrated, regional electricity markets is progressing rapidly in Europe and market integration is producing tangible results, evidenced by a reduction of around one-third in average wholesale prices over the period 2008 to 2012. However, while Member States appear to accept that non-domestic generation will contribute to meeting domestic demand in real time through these regional markets, they are reluctant to rely on non-domestic generation capacity when assessing resource adequacy in investment timescales. Many view supply reliability as a national responsibility, and rules are not yet in place that would give Member States the confidence to rely on neighbouring systems during periods of resource scarcity. This paper outlines the benefits of a regional approach to resource adequacy and assessment, and considers implementation issues that such an approach raises. The paper also identifies actions the European Commission must consider in order to make progress towards a fully integrated electricity market.