Solutions for the Resource Adequacy Issue in Alberta: Capacity Market, Scarcity Pricing, or Single Buyer Model

Abstract

This thesis focuses on possible solutions to resolve the resource adequacy issue in an energy-only market with a low price cap. Many reasons lead to resource inadequacy, including demand flaws, the missing money problem, poor coordination by investors, and penetration of renewables. In order to ensure resource adequacy in the long run, the energy-only market requires a new market mechanism to incentivize investors to create more new capacity. The thesis mainly analyzes three possible solutions: a capacity market, increase of the price cap up to the value of lost load (VOLL) in the energy-only market (Scarcity Pricing), and a single buyer model.