The renewables sector is generally open to the idea of capacity payments, provided the design is “focused.” WWF Deutschland has already made such a proposal. Craig Morris provides an overview. At present, wind and solar power are largely offsetting gas turbines, which are more environmentally friendly than coal plants. Chancellor Merkel recently stated that she is worried about the profitability of gas turbines but wants to prevent a situation where “each gas plant has to be subsidized.” The general feeling in Germany is that full-blast capacity market, where all plants receive payment based on installed capacity, is undesirable and would distort the market. One option proposed by Germany’s Environmental Agency last summer, which we mention here, would be to provide funding for peaking power plants that only make up five percent of total demand, meaning that the remaining 95 percent would still have to compete on the energy-only market. Last October, the WWF Deutschland published a proposal on a new power market design in cooperation with a number of consultants, most prominently the Öko-Institut. The … Continue reading “Focused” capacity markets – what’s that?