Private risk and social resilience in liberalized electricity markets

An Insurance Paradigm for Improving Power System Resilience via Distributed Investment

“…This effect remains evident in market designs that incentivize higher levels of investment, such as designs with capacity mechanisms. It is also interesting that outcomes of modelling the latter in a large scale grid remains consistent with the inherent bias of such market designs towards low capital/high marginal cost resources (such as legacy thermal generation), which can be detrimental in scenarios where thermal failure represents the extreme risk [8], [9]. The need for resilience in large scale power systems thus remains an important objective.…”

“…While wholesale energy markets can in theory ensure a reliable system [4] a range of recent works identify incompleteness in liberalized market architectures that can leave systems and communities vulnerable to extreme events [5]- [7]. Administrative contracting too can distort the fuel mix towards resources that are particularly vulnerable to weather extremes [8], [9]. Furthermore, to no flaw of market design, extreme events can island particular regions leaving communities disrupted and at risk for sustained periods.…”

One Year After the Texas Blackout: Lessons for Reliable and Resilient Power Systems

“…Despite the recommendations made by the Public Utility Commission (the electricity regulator) after the 2011 cold event to winterize equipment, the Texas Railroad Commission, which oversees Texas gas suppliers, has not yet implemented winterization standards for the gas sector (Griswold and Kling 2021). In addition, incompleteness in the risk trading in liberalized electricity markets (i.e., difficulty hedging risk when investing in electricity assets) has been identified as a reason for the lack of investment in winterization (Mays et al 2022).…”

Overcoming the disconnect between energy system and climate modeling

“…Although uncertainty surrounds climate change impacts on energy systems, ignoring climate change can be dangerous with respect to extremes and might lead to reduced system reliability [12,[33][34][35] and resiliency. The potential consequences of these threats are underscored by recent real-world events, like reliability failures during rolling blackouts in California and Texas in 2020 [36] and 2021 [37], respectively, and resiliency failures during wildfires in the Western United States, Australia, and elsewhere [38,39]. While peer-reviewed climate change attribution studies [40,41] have not been completed for these events, extreme weather driving these events (e.g., heat and drought) is projected to increase in severity and/or frequency under climate change in many parts of the world [42][43][44][45].…”