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Title: Wholesale electricity market design with increasing levels of renewable generation: Revenue sufficiency and long-term reliability

Journal Article · · Electricity Journal
 [1];  [1];  [1];  [2];  [3];  [1];  [3]
  1. National Renewable Energy Lab. (NREL), Golden, CO (United States)
  2. Electric Power Research Institute, Knoxville, TN (United States)
  3. Argonne National Lab. (ANL), Argonne, IL (United States)
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This paper discusses challenges that relate to assessing and properly incentivizing the resources necessary to ensure a reliable electricity system with growing penetrations of variable generation (VG). The output of VG (primarily wind and solar generation) varies over time and cannot be predicted precisely. Therefore, the energy from VG is not always guaranteed to be available at times when it is most needed. This means that its contribution towards resource adequacy can be significantly less than the contribution from traditional resources. Variable renewable resources also have near-zero variable costs, and with production-based subsidies they may even have negative offer costs. Because variable costs drive the spot price of energy, this can lead to reduced prices, sales, and therefore revenue for all resources within the energy market. The characteristics of VG can also result in increased price volatility as well as the need for more flexibility in the resource fleet in order to maintain system reliability. Furthermore, we explore both traditional and evolving electricity market designs in the United States that aim to ensure resource adequacy and sufficient revenues to recover costs when those resources are needed for long-term reliability. We also investigate how reliability needs may be evolving and discuss how VG may affect future electricity market designs.

Research Organization:
National Renewable Energy Laboratory (NREL), Golden, CO (United States)
Sponsoring Organization:
USDOE Office of Energy Efficiency and Renewable Energy (EERE), Wind and Water Technologies Office (EE-4W)
Grant/Contract Number:
AC36-08GO28308; DE AC02-06CH11357
OSTI ID:
1247648
Alternate ID(s):
OSTI ID: 1359935
Report Number(s):
NREL/JA-5D00-66188
Journal Information:
Electricity Journal, Vol. 29, Issue 2; Related Information: Electricity Journal; ISSN 1040-6190
Publisher:
ElsevierCopyright Statement
Country of Publication:
United States
Language:
English

References (7)

Economics and Design of Capacity Markets for the Power Sector journal April 2012
Forward reliability markets: Less risk, less market power, more efficiency journal September 2008
Integration of variable generation: Capacity value and evaluation of flexibility conference July 2010
Capacity Adequacy and Revenue Sufficiency in Electricity Markets With Wind Power journal May 2015
Optimizing the Spinning Reserve Requirements Using a Cost/Benefit Analysis journal February 2007
Operating Reserve Model in the Power Market journal February 2005
Dynamic Scheduling of Operating Reserves in Co-Optimized Electricity Markets With Wind Power journal January 2014

Cited By (3)

Asymmetric risk and fuel neutrality in electricity capacity markets journal October 2019
Scenario Analysis in the Electric Power Industry under the Implementation of the Electricity Market Reform and a Carbon Policy in China journal June 2019
Power system flexibility: an overview of emergence to evolution journal May 2019

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Related Subjects

17 WIND ENERGY
24 POWER TRANSMISSION AND DISTRIBUTION
resource adequacy
missing money problem
variable generation
VG
National Renewable Energy Laboratory
NREL