Identify a market you would like to work on, also describe what are relevant market design features that you consider worth investigating.

Assignment Question

Identify a market you would like to work on, Also describe what are relevant market design features that you consider worth investigating.

Look into the Electricity Market specifically the Capacity Remuneration Mechanism (CRM) in the European Union (EU). “Capacity mechanisms enable power plants to be available for generating electricity when needed. In exchange, the mechanisms provide payments to these power plants. These capacity payments are in addition to the earnings power plants gain by selling electricity on the energy market. The support measures, in the form of capacity payments, are designed to minimize the impact on market functioning and are added to the earnings power plants gain by selling electricity. They can be an issue in the EU’s internal electricity market where systems with capacity mechanisms coexist with systems where electricity producers can only rely on their earnings from sales on the ‘energy-only markets’. It is therefore very important that capacity mechanisms are only introduced if necessary. Member States need to ensure that the mechanism is proportionate to the underlying adequacy problem so that the available and expected energy capacity is sufficient to meet demands at all times.” (European Union)

Write a paper that introduces the market you picked for your project (8-15 main text pages – as with previous assignments, the content should determine length; 11-12pt standard font, 1 inch margins, double-spaced; title page, bibliography, and appendix separate page count).

Follow this structure Provide an introduction that places the market in its economic context (what industry, what product, etc.) and discuss its importance; you may want to include a short historical section, if relevant. The introduction should be accessible to someone who is not an economist. After the introduction include a short section on the literature – present the main results you have gleaned from the scholarly articles you have read (alternatively, but generally not recommended: you can also include those results carefully throughout the essay, if you prefer). Then add a market description (Capacity Remuneration Mechanism electricity market) Next add a thorough analysis of the market design features. Discuss what incentives matter, what features work, and what challenges exist. If you have any suggestions of how to improve/change the market add them here. Also discuss why the specific market design is or possibly is not appropriate for this market. End with a conclusion that summarizes what the most interesting features are about your market and what lessons you have learnt. Include all sources you use in a bibliography that you include at the end of the paper (not part of the page count) – follow a consistent bibliographic system (APA or MLA recommended). Make sure you correctly quote and attribute throughout. Also include any background material that is not directly relevant in the paper but useful as reference as an appendix after the bibliography (for instance, if you have some key numbers or tables, that you sparingly use during the paper, or an extra graph for illustration, etc.; also not part of the page count). You may use key graphs and tables in the text (number, label, and reference them), but do not include too many, in particular, on the same page (they will be subtracted from the page count).