1 A Power Company in a Competitive Electricity Market - Investment Context 1.1.A power company in the current design of the national electricity sector 1.2.Investment incentives in the generation sector 1.3.Sources of uncertainty and hwestment risk in the operation of a power company 2.A Centralised Capacity Market in the Structure of Capacity Remuneration Mechanisms - Theoretical Essentials 2.1.The origin of capacity remuneration mechanisms - the missing money problem 2.2.Definition and taxonomy of capacity remuneration mechanisms 2.3.Selected capacity remuneration mechanisms 2.3.1.Capacity payment 2.3.2.Strategie reserve (cold contingency reserve) 2.3.3.A decentralised capacity market 2.3.4.Reliability options 2.3.5.A centralised capacity market 3.Identification of Key Drivers Affecting the Economic Efficiency of a Power Company After the Implementation of a Centralised Capacity Market 3.1. Revenue drivers 3.1.1. The capacity market demand curve 3.1.1.1.Shape and elasticity of the capacity demand curve 3.1.1.2.Peak load demand 3.1.1.3.Economically justifiable reserve margin above peak demand 3.1.1.4.Cost of New Entry 3.1.1.5.Price cap - the maximum price 3.1.2. Capacity reserve supply curve 3.1.2.1.Rules for determining the amount of available capacity in sell offers 3.1.2.2.Pricing rules for bidding in the capacity auction 3.1.2.3.Share of RES and DSR in the capacity market in the context of conventional generating units 3.2. Costdrivers 4. Developing a Methodology for Assessing the Economic Efficiency of a Power Company After the Implementation of the Capacity Market 4.1.Traditional methodology for economic efficiency assessment and risk analysis of investment projects 4.1.1.Time, risk and return 4.1.2.Discount rate 4.1.2.1. Types of discount factors 4.1.3.Variants of discounted cash flow analysis 4.1.3.1.Free Cash Flow to Firm Approach 4.1.3.2.Free Cash Flow to Equity Approach 4.1.4.Metrics of the project economic efficiency in the discounted cash flow analysis 4.1.4.1.Net Present Value 4.1.4.2.Internal Rate of Return 4.1.4.3.Discounted Payback Period 4.1.5.Practical application of the DCF analysis and its methodological shortcomings 4.1.5.1.Selection of discount rates 4.1.5.2.Inflation in cash flow calculation 4.1.5.3.Risk analysis in the DCF model 4.2.Real Options Analysis 4.2.1.Real options 4.2.2.Real options valuation 4.2.2.1.Geometrie Brownian motion 4.2.2.2.Conventional algorithm for option valuation of projects with flexibility 4.2.2.3.Modified valuation model 4.2.2.4.Payoff formulae when exercising the most important options Contents7 4.3. Method for determining the level of revenues and costs associated with the introduction of a centralised capacity market 4.3.1.A company's revenues from the capacity market 4.3.2.Costs associated with participation in the scheme 5. Application of the Methodology for Assessing the Economic Efficiency of a Power Company After the Implementation of the Capacity Market 5.1.Calculation of the net present value 5.1.1.Investment outlays and depreciation 5.1.2.Electricity generation and sales proceeds 5.1.3.Operating costs 5.1.4.Gross present value, net present value and the decision criterion 5.2.Estimation of annual revenues and costs resulting from the company's operation in the capacity market 5.2.1.Revenues from the capacity market 5.2.2.Costs associated with the company's operation in the capacity market 5.3.Calculation of a company's strategie value using real options analysis 5.3.1.Construction of a volatility tree for gross present value 5.3.2.Calculation of the strategie value 5.3.3.Discussion of research findings