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

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 discussmore » how VG may affect future electricity market designs.« less
 [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)
Publication Date:
Report Number(s):
Journal ID: ISSN 1040-6190
Grant/Contract Number:
AC36-08GO28308; DE AC02-06CH11357
Accepted Manuscript
Journal Name:
Electricity Journal
Additional Journal Information:
Journal Volume: 29; Journal Issue: 2; Related Information: Electricity Journal; Journal ID: ISSN 1040-6190
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)
Country of Publication:
United States
17 WIND ENERGY; 24 POWER TRANSMISSION AND DISTRIBUTION; resource adequacy; missing money problem; variable generation; VG; National Renewable Energy Laboratory; NREL
OSTI Identifier:
Alternate Identifier(s):
OSTI ID: 1359935