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SUMMARY:Asymmetric Risk and Fuel Neutrality in Capacity Markets - Jacob Ma
 ys (Northwestern University)
DTSTART:20190321T143000Z
DTEND:20190321T151500Z
UID:TALK121429@talks.cam.ac.uk
CONTACT:INI IT
DESCRIPTION:This paper calls into question the fuel neutrality of capacity
  mechanisms implemented in liberalized electricity markets. The argument r
 elies on two assumptions likely satisfied in practice\, first that investo
 rs are risk averse and second that markets in risk are incomplete. For the
  analysis\, we develop a heuristic algorithm to solve large-scale stochast
 ic equilibrium models describing a competitive market with incomplete risk
  trading. Introduction of a capacity mechanism has an asymmetric effect on
  the risk profile of different generation technologies\, tilting the resou
 rce mix toward those with lower fixed costs and higher operating costs. On
 e implication of this result is that current market structures may be ill-
 suited to financing low-carbon resources\, the most scalable of which have
  high fixed costs and near-zero operating costs. Development of new risk t
 rading mechanisms to replace or complement current capacity obligations co
 uld lead to more efficient outcomes. Jacob Mays\, David Morton and Richard
  O&#39\;Neill
LOCATION:Seminar Room 1\, Newton Institute
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