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

Milligan, Michael; Frew, Bethany; Bloom, Aaron; Ela, Erik; Botterud, Audun; Townsend, Aaron; Levin, Todd

doi:10.1016/j.tej.2016.02.005

Cited by 79 publications

(29 citation statements)

References 13 publications

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“…A brief summary is offered in Text Box 1, and we later address the possible cost implications of managing aspects of this form of integration. (4) This report does not address market design and compensation mechanism design given the changing mix of generation resources underway, a focus of a recent FERC conference 5 and considerable other additional work (e.g., Ela et al 2016;Milligan et al 2016;IEA 2016b;Keay 2016; DOE 2017; Hogan and Pope 2017; Makovich and Richards 2017; Walton 2017; Newell and Lueken 2016;Hogan 2010;Newberry et al 2017;Gimon 2017;Orvis and Aggarwal 2017;Ela et al 2017;Haratyk 2017). At least three core issues are currently being actively debated in the research literature as well as in industry: (a) resource adequacy and the need for and design of capacity markets as the resource mix changes; (b) design of energy and ancillary services 6 (AS) markets under changing resource mixesand (c) how 'out of market' subsidies and incentive schemes should be designed, and accounted for in wholesale market designs.…”

Section: Figure 1 Wholesale Electricity Pricementioning

confidence: 99%

Impacts of Variable Renewable Energy on Bulk Power System Assets, Pricing, and Costs

Wiser

Mills

Seel

et al. 2017

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and Patrick Brown (MIT). Of course, any omissions or errors that remain are solely the responsibility of the authors. penetrations increase, but sometimes come at a cost to the consumer that is not always accounted for in generation portfolio decision-making. (see Chapters 2 and 5) All generation types are unique in some respect-bringing benefits and challenges to the power system-and wholesale markets, industry investments, and operational procedures have evolved over time to manage the characteristics of a changing generation fleet. With increased VRE penetrations, power system planners, operators, regulators, and policymakers will continue to be challenged to develop methods to smoothly and cost-effectively manage the reliable integration of these new and growing sources of electricity supply. Less-liquid bilateral markets exist outside of ISO/RTO regions. Note also that substantial amounts of generation even in ISO/RTO regions are locked-into longer-term physical or financial contracts, in which case available wholesale market prices signal opportunity costs but may not affect immediate revenue generation for those existing generators; wholesale pricing will, of course, still affect market entry decisions for new generation. 2 Where active wholesale markets do not exist, the same basic dynamics hold: the declining cost of natural gas, for example, puts economic pressure on inflexible units even in markets that do not feature an ISO/RTO.

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Section: Figure 1 Wholesale Electricity Pricementioning

confidence: 99%

Impacts of Variable Renewable Energy on Bulk Power System Assets, Pricing, and Costs

Wiser

Mills

Seel

et al. 2017

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“…However, VRE technologies have many differences from conventional technologies, such as natural gas, coal, and nuclear units, which make them more challenging to incorporate into CEMs. Table 2 summarizes many of these VRE attributes, which we compiled from various sources, including Milligan et al (2016) and Kroposki et al (2017). These attributes, to varying degrees, have economic implications for VRE, other electric sector investments, and system operations (Ueckerdt et al 2013;Blanford et al 2016).…”

Section: Introductionmentioning

confidence: 99%

Variable Renewable Energy in Long-Term Planning Models: A Multi-Model Perspective

Cole

Frew

Trieu

et al. 2017

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Long-term capacity expansion models of the U.S. electricity sector have long been used to inform electric sector stakeholders and decision makers. With the recent surge in variable renewable energy (VRE) generators-primarily wind and solar photovoltaics-the need to appropriately represent VRE generators in these long-term models has increased. VRE generators are especially difficult to represent for a variety of reasons, including their variability, uncertainty, and spatial diversity. To assess current best practices, share methods and data, and identify future research needs for VRE representation in capacity expansion models, four capacity expansion modeling teams from the Electric Power Research Institute, the U.S. Energy Information Administration, the U.S. Environmental Protection Agency, and the National Renewable Energy Laboratory conducted two workshops of VRE modeling for national-scale capacity expansion models. The workshops covered a wide range of VRE topics, including transmission and VRE resource data, VRE capacity value, dispatch and operational modeling, distributed generation, and temporal and spatial resolution. The objectives of the workshops were both to better understand these topics and to improve the representation of VRE across the suite of models. Given these goals, each team incorporated model updates and performed additional analyses between the first and second workshops. This report summarizes the analyses and model "experiments" that were conducted as part of these workshops as well as the various methods for treating VRE among the four modeling teams. The report also reviews the findings and learnings from the two workshops. We emphasize the areas where there is still need for additional research and development on analysis tools to incorporate VRE into long-term planning and decision-making.

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“…Third, this paper does not comprehensively address issues related to short-time-scale variations in VRE and technical characteristics of VRE as they affect power system reliability and VRE integration. Fourth, this paper does not address market design and compensation mechanism design given the changing mix of generation resources, which is a focus of much recent research and debate [1,[3][4][5][6][7][8][9][10]. Finally, while we seek to draw some generalizable conclusions from the available market data and literature, all of the issues addressed are highly context dependent -affected by the underlying generation mix of the system, the amount of wind and solar penetration, and the design and structure of the bulk power system in each region.…”

Section: As Input Into the Doe Staff Report Lawrence Berkeley Nationmentioning

confidence: 99%

Impacts of variable renewable energy on wholesale markets and generating assets in the United States: A review of expectations and evidence

Mills

Levin

Wiser

et al. 2020

Renewable and Sustainable Energy Reviews

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We synthesize available literature, data, and analysis on the degree to which growth in variable renewable energy (VRE) has impacted or might in the future impact bulk power system assets, pricing, and costs in the United States. Most studies of future scenarios indicate that VRE reduces wholesale energy prices and capacity factors of thermal generators. Traditional baseload generators are more exposed to these changing market conditions than low-capital cost and more flexible intermediate and peak-load generators. From analysis of historical data we find that VRE is already influencing the bulk power market through changes in temporal and geographic patterns areas with higher levels of VRE. The most significant observed impacts have concentrated in areas with significant VRE and/or nuclear generation along with limited transmission, with negative pricing also often occurring during periods with lower system-wide load. So far, however, VRE, has had a relatively modest impact on historical average annual wholesale prices across entire market regions, at least in comparison to other drivers. The reduction of natural gas prices is the primary contributor to the decline in wholesale prices since 2008. Similarly, VRE impacts on thermal plant retirements have been limited and there is little relationship between the location of recent retirements and VRE penetration levels. Although impacts on wholesale prices have been modest so far, impacts of VRE on the electricity market will be more significant under higher VRE penetrations. KEYWORDSVariable renewable energy; electricity markets; electricity prices; generator profitability 3 ABBREVIATIONS AS Ancillary services CAISO California Independent System Operator CCGT Combined cycle gas turbine CREZ Competitive Renewable Energy Zones CT Combustion turbine DOE

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

Cited by 79 publications

References 13 publications

Impacts of Variable Renewable Energy on Bulk Power System Assets, Pricing, and Costs

Impacts of Variable Renewable Energy on Bulk Power System Assets, Pricing, and Costs

Variable Renewable Energy in Long-Term Planning Models: A Multi-Model Perspective

Impacts of variable renewable energy on wholesale markets and generating assets in the United States: A review of expectations and evidence

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