A capacity mechanism next to the energy-only market provides necessary investment incentives that spot markets lack. The adequate capacity mix can only be achieved by accounting for the current transition phase to electricity generation with a growing share of renewables. We show that an...

I analyze renewable electricity policy in a multinational electricity market with transmission investment. If national policy makers choose support schemes to maximize domestic welfare, then a trade policy motive arises operating independently of any direct benefit of renewable electricity. The...