The thesis aims to answer whether and under which conditions capacity mechanisms (CMs) can effectively address security of supply in EU internal electricity market as well as the energy transition. It also embeds current CM practice within a shift from the energy-only market (EOM) framework towards a capacity-dominated market design. Methodologically it contributes by providing: (i) structured literature review on legal, economic and policy knowledge available with respect to EOM, missing-money problem and EU adequacy governance, (ii) empirical cross-sectional analysis in 27 European states mainly exploiting ACER monitoring data for measures on wholesale price volatility, renewable energy sources (RES) penetration, capacity-market design parameters and adequacy metrics, (iii) a simplified Cournot model of a capacity market that examines how adequacy assumptions and market concentration affect equilibrium capacity prices and quantities. The empirical findings show that the wholesale daily price spread in countries with CMs is lower than across EOM even when controlling for RES contribution and some other structural indicators. CM arrangements are currently fossil fuel dependent with limited cross-border participation while the CM costs per capita vary significantly even for countries with a similar level of security of supply. The Cournot analysis highlights the importance of capacity prices as adequacy signals which are likely to exceed the cost of new entry in a concentrated market when reliability is highly regarded. The thesis argues that CMs have become a part of the EU’s security of supply policy even if CMs role to energy trilemma is still ambiguous. Enhanced harmonisation of adequacy governance, regional integration and competitiveness mechanisms along with improvements in the alignment of CM performance incentives with flexibility and decarbonisation priorities will support a capacity-dominated market design in the future.