Implementation of a Capacity Market in Sweden

Abstract: In the coming decades there will be an increaseof electricity consumption as the industry and transportationsectors are electrified. Electrification and the rapid expansionof renewables will have great impact on the electricity market.In order to ensure that there is enough electricity, differentcapacity mechanisms are possible solutions. In this paper, theneed of a capacity market in Sweden is studied. Simulations ofcapacity markets with convex downwards sloping demand curvesdemonstrated possible outcomes of such a market. A comparisonbetween a FCM and Sweden’s strategic reserve is also carriedout. The results of this project show that even though peakingpower plants are not profitable, there is no immediate need fora forward capacity market.