Impact of different balancing zones on the capacity market design in Europe towards 2050

As the concept of capacity market is currently under heavy discussion within the European context, only a few European countries have reached the implementation phase of the capacity market. Significant research efforts have been made to identify the origin, design challenges as well as the underlying framework of capacity markets. This paper evaluates the capacity market in the European context, proposes a method for quantifying the analysis, and provide a set of capacity market framework recommendations to the stakeholders, such as policy makers and market participants among others. This paper proposes four balancing variants within the EU context (EU 27 + Norway, Switzerland), a) Each country performs its own energy balancing, b) Seven balancing zones, c) Three balancing zones and d) Single balancing zone. All four variants are subject to the five generation/demand scenarios that have been developed within the IRENE-40 project, namely Conventional Power scenario - Business as usual (BAU), Carbon Capture and Storage scenario (CCS), Desertec scenario (DES), Renewable scenario (RES) and High Efficiency scenario (EFF). Following market simulations, policy recommendations are laid out for the future direction of the European capacity market design.