One also observes that the market clearing power plant receives its marginal cost, while for the other plants the clearing price is higher than their running cost. The difference between the clearing price and the marginal cost is known as the inframarginal rent. Inframarginal rents are needed to recover fixed generation costs. Only if the market clearing price is higher than the sum of the marginal and fixed cost for most of the time, the technology will be attractive for investors. Investment in generation capacity is of crucial importance for the security of supply. To lower investment risks in generation capacity, grid operators can implement capacity mechanisms.
Disclaimer: Next Kraftwerke does not take any responsibility for the completeness, accuracy and actuality of the information provided. This article is for information purposes only and does not replace individual legal advice.
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