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EPSA Policy Paper: Forward Capacity Markets Essential to Reliability
"Recognizing the value of existing generation, new supply investments and demand response, these markets are essential in many parts of the country as the power industry is faced with uncertainty over demand forecasts, environmental concerns and the rising cost of building new generation."
Washington, D.C. - Well-structured forward capacity markets provide the mechanism needed to help ensure reliable service in the regional organized wholesale electricity markets, according to Essential Elements of Forward Capacity Markets, a policy paper released today by the Electric Power Supply Association (EPSA).
John E. Shelk, president and CEO of EPSA, said, "Forward capacity markets are equally valuable to power suppliers and customers, because they give each the ability to participate in the marketplace by making informed decisions about electricity production and consumption for the future. Recognizing the value of existing generation, new supply investments and demand response, these markets are essential in many parts of the country as the power industry is faced with uncertainty over demand forecasts, environmental concerns and the rising cost of building new generation."
EPSAs policy paper explains the purpose and benefits of forward capacity markets and includes a description of four essential elements necessary to these markets in order to ensure regional reliability for customers:
- The right long-term price signal;
- Cost of new entry (CONE);
- Benefits of a location-specific price signal; and
- Comparability of supply and demand resources.
Forward capacity markets currently exist in two of the regional organized electricity markets: ISO New England and the PJM Interconnection. While each RTO/ISO capacity market has unique elements, in general the RTO/ISO serves as the buyer in an auction for electricity resources to be available for delivery approximately three years in the future. By holding the auction three years in advance, suppliers and customers are provided important early indicators of the balance of supply and demand, giving power suppliers guidance to inform decisions such as whether to invest in building new power plants in the region and whether to keep existing power plants from being retired. These forward markets similarly give consumers the tools to react and participate in the market through demand response products and programs.
EPSAs Essential Elements of Forward Capacity Markets is available at www.epsa.org under "Positions and Filings/Studies and Reports".
- EPSA - EPSA Press Release: Forward Capacity Markets Essential to Reliability
Policy Paper: Essential Elements of Forward Capacity Markets
CONTACT: JOHN SHELK
(202) 349-0154or 703-472-8660
EPSA is the national trade association representing competitive power suppliers, including generators and marketers. These suppliers, who account for nearly 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving global power markets. EPSA seeks to bring the benefits of competition to all power customers.