Resource adequacy and capacity markets

In this presentation we discussed some basic questions on resource adequacy and capacity markets and review recent market design developments along with empirical data from existing markets. Some of the questions we look at include whether capacity markets are necessary to ensure resource adequacy in the first place? If so, what have we learnt so far from our experiences in existing markets? Do capacity markets actually lower price volatility in the energy market? Do they exacerbate or moderate the boom-bust cycle? If capital markets require long-term contracts for financing new investments in generation, does it really matter whether the contracts are for energy or capacity? While forward procurement of capacity can increase supply elasticity, will it reduce the incentive for long-term bilateral contracts by load-serving entities? We review empirical data from existing markets to examine these questions.