Government contracted with Frontier Economics and LCP to conduct research into the issue of Price Duration Equivalence in the Capacity Market – broadly, whether an appropriate methodology could be found to establish price equivalence between the different lengths of agreement (one, three and up to 15 years) that are traded within the same Capacity Market auction.
Price duration equivalence
Price duration equivalence options presented in the research pack are discussed, analysed and summarised within this document. This pack contains research conclusions and full analysis on a range of price duration curve methodologies, including both a quantitative and qualitative evaluation.
Price duration equivalence research
This research pack provides a review of a wide range of markets to identify methods by which price duration equivalence has been applied. The pack begins to explore potential price duration equivalence methodologies by reviewing stakeholder responses to DECC’s 2014 consultation and building on DECC analysis already undertaken. The research then goes on to cover non-UK capacity markets, as well as energy and non-energy markets globally and identifies potential alternative approaches to address price duration equivalence and highlight any suitable lessons learned.