Context: albeit still at a slower pace than in the EU, the electricity markets in the Contracting Parties are experiencing a period of complex transition. With the rapid increase in intermittent renewable electricity generation and the gradual phase-out of conventional coal and nuclear generation, there is a growing concern that energy-only electricity markets will not be able to deliver sufficient generation capacity in the coming years including potential impact on security of supply. At this point in time, the Contracting Parties are still faced to lack of forward trading, no day-ahead hourly signals, no intraday markets, most of the electricity is traded between incumbent generator and incumbent supplier, non-efficient use of cross-border capacity, etc. and thus have not achieved the level of maturity required for the European target model of energy-only markets neither on a national nor regional level. A consultancy project of the Energy Community Secretariat looks into to which extent adequacy issues could and should be addressed through national or a regional capacity mechanism in line with State aid law and the Large Combustion Plants Directive 2001/80/EC and Industrial Emissions Directive 2010/75/EU besides or instead of additional capacity, reserves or flexibility, but also the options of more efficient market integration and use of interconnection capacity. While the energy-only market integrated in the internal electricity market remains the target also for the Contracting Parties, the national regulatory authorities should have full understanding of the capacity mechanisms applied in the EU and their impact on the electricity market. |