Description:
The article deals with pricing and investment consequences of using alternative ways to stimulate investment in thermal power plants (TPP) modernization. Calculations made with the use of our simulation-based financial model show that “pure” market mechanisms (such as the spot market and capacity market with marginal pricing) are not efficient enough in terms of keeping balance between robust investment signals and electricity prices produced. In this light, a flexible regulation of capacity market “price cap” is recommended, which should be derived from the assessment of the necessary revenue for operation and investment activity of thermal generation.