The Challenge of Integrating Demand Response in Capacity Remuneration Mechanisms: Providing a Comprehensive Theoretical Framework

Capacity Remuneration Mechanisms (CRMS) have become a pillar of the design of decarbonizing electricity markets. By complementing the economic signals conveyed by the energy market, they aim at enhancing resource adequacy, particularly in the current context in which power systems transition toward low-carbon technologies. CRMs are also being mentioned as a key piece to prevent, in the future, scenarios such as the energy crisis that started in 2021 in the European Union.