Joint Seminar on Capacity Remuneration Mechanisms

Today, the ultimate goal of electricity markets, not only in Belgium but all over Europe, is to ensure the progressive decarbonisation of the system whilst at the same time guaranteeing high levels of security of supply at affordable costs. What we observe, however, is essentially a struggle of utilities to find the right balance between these three pillars since action in one domain inevitably triggers an impact on the other two. In order to comply with the decarbonisation objective, for example, large quantities of variable renewable energy sources are added to the system. These renewables do possess the characteristic of having a marginal cost close to zero which, in energy-only markets, depresses prices at certain moments in time. One of the ensuing consequences then is that much needed investments in the face of the energy transition are, because of low commodity prices, at best put on hold, at worst cancelled all together, which impacts security of supply. A patch to trigger new investments and at the same time offer economically challenged generation assets a balloon of oxygen, is to implement a system in which not only the generation and supply of electricity are remunerated but also the availability of production capacity. These so-called capacity remuneration mechanisms are, however, being contested because they go counter the spirit of liberalisation by adding another layer of subsidies on top of the already vast amount of existing subsidy schemes. In this seminar, the floor is given to the “fine-fleur” of energy economists who will present diverging views on the necessity or ridiculousness of the adoption of such a system.