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Title: Revenue Sufficiency and Reliability in a Zero Marginal Cost Future

Abstract

Features of existing wholesale electricity markets, such as administrative pricing rules and policy-based reliability standards, can distort market incentives from allowing generators sufficient opportunities to recover both fixed and variable costs. Moreover, these challenges can be amplified by other factors, including (1) inelastic demand resulting from a lack of price signal clarity, (2) low- or near-zero marginal cost generation, particularly arising from low natural gas fuel prices and variable generation (VG), such as wind and solar, and (3) the variability and uncertainty of this VG. As power systems begin to incorporate higher shares of VG, many questions arise about the suitability of the existing marginal-cost-based price formation, primarily within an energy-only market structure, to ensure the economic viability of resources that might be needed to provide system reliability. This article discusses these questions and provides a summary of completed and ongoing modelling-based work at the National Renewable Energy Laboratory to better understand the impacts of evolving power systems on reliability and revenue sufficiency.

Authors:
Publication Date:
Research Org.:
National Renewable Energy Lab. (NREL), Golden, CO (United States)
Sponsoring Org.:
USDOE Office of Energy Efficiency and Renewable Energy (EERE), Wind and Water Technologies Office (EE-4W)
OSTI Identifier:
1352501
Report Number(s):
NREL/PR-6A20-67500
DOE Contract Number:  
AC36-08GO28308
Resource Type:
Conference
Resource Relation:
Conference: Presented at the 15th International Workshop on Large-Scale Integration of Wind Power, 15-17 November 2016, Vienna, Austria
Country of Publication:
United States
Language:
English
Subject:
29 ENERGY PLANNING, POLICY, AND ECONOMY; component; revenue sufficiency; reliability; resource adequacy; capacity adequacy; LOLP; LOLE; missing money; production cost modelling; ERCOT

Citation Formats

Frew, Bethany A. Revenue Sufficiency and Reliability in a Zero Marginal Cost Future. United States: N. p., 2017. Web.
Frew, Bethany A. Revenue Sufficiency and Reliability in a Zero Marginal Cost Future. United States.
Frew, Bethany A. 2017. "Revenue Sufficiency and Reliability in a Zero Marginal Cost Future". United States. https://www.osti.gov/servlets/purl/1352501.
@article{osti_1352501,
title = {Revenue Sufficiency and Reliability in a Zero Marginal Cost Future},
author = {Frew, Bethany A.},
abstractNote = {Features of existing wholesale electricity markets, such as administrative pricing rules and policy-based reliability standards, can distort market incentives from allowing generators sufficient opportunities to recover both fixed and variable costs. Moreover, these challenges can be amplified by other factors, including (1) inelastic demand resulting from a lack of price signal clarity, (2) low- or near-zero marginal cost generation, particularly arising from low natural gas fuel prices and variable generation (VG), such as wind and solar, and (3) the variability and uncertainty of this VG. As power systems begin to incorporate higher shares of VG, many questions arise about the suitability of the existing marginal-cost-based price formation, primarily within an energy-only market structure, to ensure the economic viability of resources that might be needed to provide system reliability. This article discusses these questions and provides a summary of completed and ongoing modelling-based work at the National Renewable Energy Laboratory to better understand the impacts of evolving power systems on reliability and revenue sufficiency.},
doi = {},
url = {https://www.osti.gov/biblio/1352501}, journal = {},
number = ,
volume = ,
place = {United States},
year = {Mon Apr 17 00:00:00 EDT 2017},
month = {Mon Apr 17 00:00:00 EDT 2017}
}

Conference:
Other availability
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