Capacity payment allocation in hydrothermal power systems with high shares of renewable energies

The increasing use of variable generation technologies (VGTs) in power systems, such as wind and photovoltaic generation, has introduced new challenges in the definition of capacity remuneration mechanisms for promoting system reliability. In this context, in this article we propose a novel framework for determining the capacity value of VGTs to contribute to the generation system adequacy, as well as a corresponding method for allocating capacity payments in hydrothermal power systems. We show that the capacity value of VGTs increases with the presence of water reservoirs, since VGTs help relieving hydropower plants from using scarce water resources during off-peak hours thus making more resources available to supply the demand during peak hours.