Capacity market
Also known as: Capacity Mechanism, Capacity Auction
A market mechanism that pays generators and storage operators for having capacity available on demand, regardless of actual dispatch. The UK Capacity Market and various US mechanisms (PJM, MISO, ISO-NE) operate this way.
In energy storage
Capacity market contracts provide a stable, long-term revenue stream that improves bankability for project-financed BESS. The contracted capacity obligation typically requires the asset to be available for dispatch during system stress events, with penalties for non-delivery. Capacity market revenues are often stacked with ancillary services and wholesale trading to build a viable business case.
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