Capacity markets have been promoted as a means to address a number of perceived gaps in restructured electricity markets. In a restructured market environment, some suppliers may be unable to recover most or all of their fixed costs through sales of energy and ancillary services alone. Further, in order to meet reliability needs, electricity markets require generating capacity above and beyond the requirements to simply meet demand. Thus some peaking power generators may only operate for a few hours a year, if at all. In markets where wholesale electricity prices are capped, capacity markets are also meant to signal the need for new capacity when supply becomes relatively tight. Capacity markets that allow for location-specific prices should also signal to developers where capacity is needed most. In both of these roles, capacity markets are intended to replace targeted subsidies such as “reliability must-run” contracts or uplift payments to support needed but otherwise uneconomic generation. Capacity markets can also serve as an incentive for investment in alternatives to generation, such as demand response or transmission.