This paper examines the evolution of the Irish Single Electricity Market in order to comply with the European Target Model for electricity. In particular, this work focuses on the challenges raised by the high concentration in the generation sector of the Irish electricity market. We examine the theoretical and empirical conditions under which forward markets promote competition in the spot and retail markets. We also investigate the impact of market concentration on the new capacity payment mechanism. In order to ensure a competitive outcome for consumers, the regulatory authorities should promote competition in the forward market; moreover, the regulator should extend regulation to the price and quantity that the dominant firm bids for holding new reliability options.
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