Reliability market
Planning our electric future: a White Paper for secure, affordable and low-carbon electricity, Glossary, published by the Department of Energy & Climate Change on 14 July 2011, defines a Reliability Market as: ‘A type of Capacity Market (which is a type of Capacity Mechanism). In a Reliability Market, what is purchased from providers (which could be generators or suppliers of storage or demand side response) is a ‘reliability contract’, essentially a call option. The reliability contract provides a hedge for the holder, enabling the holder to purchase energy at no more than the strike price or, if energy is simply not available, to be compensated for the missing energy. In return for this hedge, the provider receives a payment (the option premium) which provides a reliable source of income.’
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