De-rating factors in regional capacity mechanisms with cross-border participation: the role of asymmetric national non-served energy values

Abstract

Capacity mechanisms (CMs) are regulatory frameworks often implemented to address market failures and ensure the long-term reliability of electricity supply. In the context of regional markets, these mechanisms can maximize overall efficiency if they allow for the participation of cross-border generators. When implementing national CMs, it is common to establish a methodology to determine the de-rating factors of the different resources participating in the scheme which represent the effective contribution of generation resources in meeting adequacy requirements. If the objective is to allow the participation of cross-border resources in the national CM, it is also necessary to compute these de-rating factors to the generators located in the neighboring system. The literature on this topic is scarce and this is the gap to which this paper aims to contribute. This paper proposes a methodology to compute de-rating factors to the multi-area case. In addition, we explore how the non-served energy cost established by the countries sharing the common border can influence the results.