Competitive Electricity Markets and Investment in New Generating Capacity

Abstract

Abstract Policy-makers in many countries are expressing concerns that competitive wholesale electricity markets are not providing appropriate incentives to stimulate ‘adequate’ investment in new generating capacity at the right time, in the right places, and using the right technologies. These concerns are often expressed in the context of concerns about ‘supply security’, ‘reliability’, ‘resource adequacy’, or ‘supply diversity’. In most cases the concerns have been raised as policy-makers observe growing electricity demand, shrinking reserve margins, and rising prices, but little evidence of investment in new generating capacity responding to balance supply and demand consistent with traditional metrics for generation resource ‘adequacy’.