The capacity market ensures there is always enough available power to cover peak demand periods.
The Capacity Market is a mechanism introduced to ensure long-term electricity system security, guaranteeing sufficient generation capacity is always available to cover peak demand.
Why it was introduced
With the growth of renewables (wind and solar), electricity production becomes less predictable and programmable. Traditional thermal power plants, needed as backup, risk becoming economically unsustainable if they operate only a few hours per year. The Capacity Market compensates them for their mere availability to produce, regardless of actual production.
Comparison of remuneration mechanisms
| Mechanism | What it pays for | Who participates | Payment type |
|---|---|---|---|
| Capacity Market | Capacity availability | Generators, storage, demand response | Fixed annual |
| Energy Market (MGP) | Energy actually produced | All producers | Variable hourly |
| MSD | Balancing services | Flexible plants | Per service |
How it works
Terna organizes competitive auctions where owners of generation plants and storage systems offer their available capacity for future periods. Winners receive a fixed annual payment in exchange for committing to be available when needed. Demand can also participate through demand response programs.
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