Equilibrium Pricing with Duality-Based Method: Approach for Market-Oriented Capacity Remuneration Mechanism

The crucial design elements of a good capacity remuneration mechanism are market orientation, insurance long-term power system adequacy, and optimal cross-border generation utilization. Having in mind these elements, this research aims to propose financially fair pricing that will guarantee enough new not present state aid. proposed is an easy-to-implement linear program problem presented its primal dual form. shadow prices the variables used calculate firm which needed for adequacy under mechanism. In order test if ensures sufficient prices, tested on European Network Transmission System Operators Electricity (ENTSO-E) regional block consisting Austria, Slovenia, Hungary, Croatia with simulation conducted period one year one-hour resolution different scenarios credible critical events from standpoint security supply; amounts newly installed capacity; short-run marginal costs factors capacity. Test data such as electricity load referred 2018. results show worst-case scenario isolated dry hydrology high values indicators expected energy served (EENS), loss expectation (LOLE), probability (LOLP) Croatia. Therefore, several hundred MW stabilize at lower values. Price depends range should be 1000–7000 €/MW/year value lost (VoLL) 1000 €/MWh 3000–22,000 VoLL 3100 correlates already established markets. methodology can assist policymakers, regulators, operators when determining rules both price caps. On other hand, it help participants prepare most suitable near-optimal bids