The Capacity Payments Mechanism is a Fixed Revenue system of payment for participants offering generation capacity in the SEM. The mechanism features at its core, a fixed "pot" of money that is calculated on an annual basis by the Regulatory Authorities, with technical assistance from the System Operators.
The pot is calculated as the multiple of a Volume element (in megawatts, the capacity required to adequately serve the market demand), and a Price element (in €/ kilowatt, the annualised fixed costs of a best man entrant peaking plant). The pot is fixed and published four months prior to the commencement of the Trading Year.
During the Trading Year,the capacity pot is "filled" through ongoing Capacity Charges levied on participants who purchase energy from the pool, and is concurrently paid out in ongoing Capacity Payments to participants who provide generation capacity to the market.
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