Nuclear Capacity Auctions

We propose nuclear capacity auctions as a means to correcting the incentives for investing in nuclear power. In particular, capacity auctions open the market for large-scale entry by outside firms. Requiring licensees to sell a share of capacity as virtual power plant contracts increases auction efficiency by mitigating incumbent producers’ incentive to bid for market power. A motivating example is Sweden’s policy reversal to allow new nuclear power to replace old reactors.