Impact of capacity market design on power system decarbonization

Current models of capacity market designs in the U.S. and elsewhere ignore the important issue of carbon emission produced by power generators. While the current designs may produce optimal and efficient capacity market prices, these designs contribute little or nothing to reduce such emission. In this paper, we present a novel alternative to the current capacity market design which can realistically achieve the noble goal of power system decarbonization. While there are a number of possible design choices, the new design developed in this work explicitly models the carbon pricing in the market clearing problem. Using PJM capacity market as a base model, we show that the new capacity market design can achieve the decarbonization goal with some reasonable increase of capacity market prices.