Capacity Auctions

Capacity auctions are competitive processes where electricity providers bid to supply a certain amount of reliable power capacity needed to meet future demand. These auctions ensure there’s enough available energy during peak times, especially in high-demand periods. Utilities or system operators set a target capacity and invite suppliers to offer their capacity at competitive prices. The lowest bids are accepted until the required amount is reached, providing a predictable and secure power supply. Essentially, capacity auctions incentivize investments in reliable energy resources, helping prevent shortages and maintaining grid stability.