A capacity market is a market where users pay a fixed amount for the capacity installation of

electricity generators. This mechanism offsets the risks of new generation capacity installation from
the producers to the consumers.

Ruditopia as a country does not suffer from low capacity however it does have a problem of high
electricity prices especially during the peak hours of demand. Therefore an capacity market can be
put into place so that newer facilities with lower per unit cost of electricity can be obtained. The
capacity markets will ensure a stable supply of electricity at a reasonable cost even during peak
hours.