Chapter 7: How to ensure adequate investment in power plants?
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In the seventh chapter of this book, we cover European practices to ensure adequate investment in power plants, i.e. adequacy. We discuss this topic by answering three questions. First, why did some countries introduce a capacity mechanism? We explain the concepts of missing money and missing markets, and the politics of capacity mechanisms. Second, what is the best capacity mechanism? We discuss the main lessons learned from the experiences with capacity mechanisms of Spain, Sweden, Great Britain and Ireland. Third, how to limit the (ab)use of capacity mechanisms? The Clean Energy Package introduced an EU-wide resource adequacy assessment and a market reform implementation plan that need to be considered before implementing capacity mechanisms. The chapter ends with a conclusion, in which we summarize our main points.