Capacity Auction Strategies

The goal of capacity markets in electricity is to create incentives to encourage investments for the upkeep of existing generation and promote the development of new resources in order to maintain adequate system reliability. Electricity markets around the world continue to experiment with various forms of capacity market structures ranging from voluntary or state-administered bi-lateral contracts to centralized capacity auctions (spot or forward) and administered capacity markets with a prescribed demand curve; or single all-inclusive energy only markets without a comple- mentary capacity product.

The consultants at Enerlytix have worked with every one of these market structures.  In the process we have developed proprietary tools to model each of these market structures, particularly the more complex forward capacity markets in the US.  Our consultants have successfully deployed these tools to develop auction strategies for over $1.8 billion in capacity revenues.  We employ these tools to -

  • Forecast forward capacity market prices
  • Study the impact of alternative offer strategies on regional and local market revenues
  • Analyze impact of prospective rules or market structures to inform industry advocacy positions with respect to new market design or improvements to the existing market structures
  • Develop a comprehensive view of asset profitability by combining prospective energy margin trends and capacity revenues