Allowing explicit participation in capacity markets: an improvement or a false hope?

What is the best way to prevent capacity remuneration mechanisms (CRMs) of individual EU Member States from generating negative externalities in their neighbours?

Join us for the third and final instalment of the FSR Insights series’ quarterly theme “Securing Europe’s Energy Future”

Emma Menegatti, PhD candidate with the Loyola De Palacio Chair at the FSR, will present her working paper, co-authored with the FSR Director, Leonardo Meeus.

The paper models four types of externalities that the adoption of a capacity market can generate on a neighbouring energy-only electricity market zone, and compares the impact of three different approaches to cross-border participation: no participation, implicit participation, and explicit participation.

The webinar aims to shed light on the potential of cross-border participation in solving the cross-border issues caused by national capacity markets. This is a timely discussion, as CRMs are no longer seen as just a temporary or last-resort solution for security of supply issues. Instead, the latest EU market reforms recognize CRMs as a structural element of the electricity market.

Nevertheless, Member States willing to adopt a CRM must notify the European Commission (EC) and get state aid rules cleared. Following the 2024 Electricity Market Design reform, the EC is required to publish a report in early 2025 on streamlining and simplifying the process for applying for a capacity mechanism.

Derek Bunn, professor at the London Business School, and Eline Spyrou, lecturer at the Imperial College of London, will provide commentary on Emma Menegatti’s presentation, enriching the conversation with diverse perspectives. Moderated by Nicolò Rossetto and Marzia Sesini from FSR, the session will invite audience participation, encouraging an engaging and thought-provoking dialogue.

Keynote Speaker

Emma Menegatti | FSR

Discussants

Derek Bunn | London Business School

Eline Spyrou | Imperial College London

Moderators

Marzia Sesini | FSR

Nicolò Rossetto | FSR