Capacity payment mechanisms: an analytical assessment of contemporary experiences and lessons for future electricity market design.

Summary Capacity mechanisms (CRMs) are set up to align the market equilibrium with the social optimum, i.e. to ensure security of supply at the lowest cost. In theory, energy-only markets are supposed to achieve this objective, but their effectiveness is questioned. While the merits of characterizing CRMs as a second-best mechanism have occupied researchers for several decades, the empirical evaluation of CRMs has received much more limited attention. This gap provides a fertile area for academic research, but limits one's ability to translate theoretical findings into policymaking. Empirical evaluation of MRCs is all the more necessary because their performance depends not only on country-specific structural, technical, and cultural parameters, but also on the details of their implementation. As such, this thesis presents the first work dealing with the empirical performance of CRMs as well as with regulatory implementation choices. The study of the relative convergence of MRC designs since the 1990s allows for the identification of the characteristics essential to their success, while the divergence of results in the existing quantitative literature helps to assess the remaining future challenges. The net cost of such a market intervention is also discussed using a cross-national econometric approach. Finally, agents' preferences for the accuracy of information on capacity obligations are addressed in an analytical model.