Insuring the penalty risk of non-delivery in the United Kingdom's capacity market

C. K. Woo, K. H. Cao, A. Tishler

Research output: Contribution to journalArticlepeer-review

Abstract

In July 2021, the United Kingdom (UK) Government considered tripling the UK grid's performance-based incentive scheme's penalty for capacity non-delivery during a shortage. This paper proposes an insurance that a generator may buy to manage its risk exposure to the scheme's penalty. It also shows how to use readily available data to calculate the insurance's per MW premium. These findings suggest that the proposed insurance deserves consideration by generators and insurance sellers.

Original languageEnglish
Article number107157
JournalElectricity Journal
DOIs
StateAccepted/In press - 2022

Keywords

  • Capacity non-delivery
  • Electricity grid
  • Incentive scheme
  • Penalty risk
  • United Kingdom

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