What is the main purpose of capacity payments to energy generators?

The main purpose of capacity payments to energy generators is to ensure that these generators are available during periods of peak demand. Capacity payments provide financial incentives to power plants to maintain operational readiness, even if they are not generating electricity all the time. This is especially important during times when electricity consumption surges, such as during heat waves or extremely cold weather, when additional power is needed to meet demand.

By compensating generators for being available, grid operators can ensure that there is sufficient capacity to meet consumer needs and maintain reliability within the electrical grid. This mechanism helps to prevent blackouts and ensures that energy supply remains stable, ultimately benefiting consumers by providing a reliable source of electricity during high-demand periods. This reflects the broader goals of grid management, which include maintaining a balance between supply and demand while supporting infrastructure resilience.