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Rethinking power markets: 

Capacity mechanisms and decarbonization

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Today, after 15-20 years past since electricity markets liberalization had taken place in the most developed  countries as well as in many developing ones, new challenges have arisen facing the world energy industry. How to preserve energy services reliable and accessible for everyone in conditions of progressing trends of the world economy decarbonization? How would achievments of technological revolution serve to the public good and a new would harmoniously evolve from an old, not destroying it? That is an extremely difficult task to cope with which must be taken care of and resolved by all market actors. 

Market designs in electricity, capacity markets as an instrument for investments to generation as well as providing adequacy in midterm perspective have been being discussed world wide, especially in the last few years. A number of european countries, some provinces in Canada, states in Australia, where the only energy markets have been reigning over the electricity within last 20 years, introduce capacity mechanisms remuneration by the one way or another.  The reason is obvious – a very fast  proliferation of unstable renewables which squeeze out the traditional dispatchable generation from the market. Another reason having clearly manifested in the last two years is a necessity to find a way to handle the energy crises caused by politically motivated shortages of gas supply and by financial destabilization of covid times. The modern power markets need flexibility and that can be achieved only through  comprehensive capacity mechanisms supporting rarely used  but ready-to-go resources, preferrably low carbon ones.  

Another considerable trend having become noticeable in the last few years is a wide spread of Decentralized (Distributed) Energy Resources (DERs) mostly based on renewables with batteries as a balancing means. That in turn has required various platform solutions which radically transform current market designs and roles of its main actors. 


As a result of ongoing changes, growing uncertainties, many experts around the world have  asked  themselves the fundamental question again, a very popular one, back in time, when market reforms in electricity had started: is a  competitive electricity  market capable to resolve the problems of the developing and transforming industry and to fit modern constantly altering challenges in an optimal way from the public good point of view? There is a tense discussion on that these days, especially in relation to and on the backdrop of soaring prices in Europe, but, in general, so far the answer is leaning to the maxima: the market is better suits the challenges than cumbersome and rigid state regulation.  

In this context the tendencies of the market development in Russia, the antimarket program of so called DPM (Dogovory predostavleniya mosh'nosti – Capacity Delivery Agreements) which brought online a glut of unnecessary generation, as well as commencing a second DPM  program for renovation of the  old,  deadly obsolete  soviet design plants  a few years ago in combination with the latest decisions to "spare" because of sanctions new effective CCGT blocks, built on foreign technologies, raise a very painful question– how effective competitive electricity market can be in the Russian specifics generally? And not only in the Russian ones, though?  


For some of these questions you may find answers in our materials at this site including our articles in the Blog section(mostly Russian).          





We do not pretend to the ultimate truth and rightness for all these issues, but we certainly have our own opinion on many of them. We hope it might be useful and interesting for you. 

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