Description

The current energy transmission brings about several challenges for the Austrian/German energy only market (EOM) system. This work analyses the current problems of the EOM and investigates if a capacity mechanism is required to trigger investment incentives and to ensure the security of supply. The present bad market conditions for the required conventional power plants are caused by overcapacities and an insufficient adaptation of the power plant fleet to the new residual load curve. Therefore, the low electricity prices can be interpreted as a natural market signals to adapt the power plant fleet to the residual load requirements. The current structure of the EOM cannot guarantee the provision of marginal peak power plants without endangering the security of supply through scarcity situations. Hence, financial incentives are required to ensure the provision of these peak power plants and the recommended security margin for the security of supply. While the implementation of a complete capacity market limits the effective market signals from the EOM, a strategic reserve can be easily introduced to strengthen the market signals of the EOM and function as a security net to guarantee supply. Alternatively the adequate implementation of demand response measures could strengthen the functionality of the EOM and would reduce the requirements for a strategic reserve.