Future market design options for electricity markets with high RES-E: Lessons from the Irish Single Electricity Market

van der Veen and Hakvoort [14] examine the full extent of the design challenge in the context of the inter-linkages between the balancing market and the wider electricity market. [...] The international literature is quite clear that capacity markets are required as a result of market failures, specifically the lack of participation by the demand side in realtime dispatch and the inability of consumers to economically signal their desired level of reliability to the market. [...] Given the ongoing level of market concentration in the SEM and the fact that RES-E can play little to no role in mitigating market power in the capacity market in particular, the continued reliance by EU policy makers on interconnection and coordinated market clearing to ensure competition is worrying. [...] The question of revenue sufficiency has been raised many times in the literature, and the possibility of variation in the level of competition, demand side activity, interconnection levels, and market liquidity, particularly in forward markets, to address the issue have been proposed. [...] This option is therefore similar to the proposal to monitor the outcome of the capacity market and to contract for system services on the basis of the difference between the capability of the capacity fleet to provide the required level of system services and the required levels, as determined by the System Operator according to some objective criteria.