Capacity Pricing

Capacity pricing ensures power plants are paid for being available to generate electricity when needed, even if they aren’t producing power at all times.

How It Works
Utilities pay power generators to maintain reserve capacity, ensuring electricity is available during high-demand periods, unexpected outages, or seasonal fluctuations. This guarantees grid stability even when renewable generation fluctuates.

Grid Benefits
Capacity pricing helps prevent blackouts, improves grid resilience during extreme weather, and supports a reliable energy supply as more intermittent renewable sources like wind and solar are integrated.

Challenges & Costs
While capacity pricing enhances grid stability, critics argue it can lead to excessive payments for underused plants, potentially increasing electricity costs without significantly improving reliability.