Galetovic A., Munoz C. M., Wolak F. A. (2015)

Capacity Payments in a Cost-Based Wholesale Electricity Market: The Case of Chile. The Electricity Journal, vol. 28 (10), 80- 96, 2015



A comparison of the generator revenue and market efficiencyimplications of an energy and capacity payment marketrelative to an energy-only market for the cost-based Chileanelectricity supply industry finds that, while monthlyrevenue volatility for generation units is significantlyhigher for the energy-only market, this is almost entirelyexplained by an increase in short-term energy pricevolatility. This increased short-term price volatilityprovides incentives for market participant behavior thatenhances market efficiency and system reliability.

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