Capacity markets only makes sense if there is a regulatory obligation to meet Resource Adequacy requirements. It would be a forward market in capacity – not a spot market.

For example in California, the CPUC imposed a new regulation saying that by October of each year, the IOU’s had to demonstrate that they had enough capacity (identifiable real plants) under contract for the following Summer months to meet 95% of their anticipated Summer demand and they have to have 100% under contract on a month-ahead basis. traditional Forward contracts are energy only – there’s no plant backing it up and so they don’t count.

So a capacity market will facilitate the trading of short-term capacity so that utilities can balance their requirements on a short term basis (i.e. if their demands don’t develop, they have a way to unload capacity they may have pre-purchased, and vice versa).

Anyway, capacity markets go hand in had with Resource Adequacy requirements – which we don’t have yet in the Philippines.

Here’s an older post. Not much there; I’ll try to write more on it.