Electricity Market Design
Researchers at NREL are studying electricity market designs to find ways to better accommodate variable renewable energy resources and maximize competition, efficiency, and fairness. About two-thirds of the United States' electricity load is operated under restructured electricity markets administered by independent system operators. These markets are highly complex and combine the physics of electricity with the principles of economics. Most electricity markets were designed in the 1990s and early 2000s, when renewable electricity resources and other emerging technologies were not as common as they are today.
Assessing the need for future power plants is called "resource adequacy," and it has always been an important part of power system planning. It answers the question of how much capacity is needed. On electric power systems with high penetrations of variable generation, some thermal plants will run less often, and in restructured electricity markets, high levels of variable generation have been shown to decrease prices. This may induce "revenue insufficiency" that requires well-designed capacity markets, payments, or other mechanisms to address. NREL's research is evaluating potential revenue sufficiency issues and investigating alternative methods of attaining resource adequacy.
The integration of large amounts of variable generation increases the need for a power system to have sufficient flexibility to maintain reliability. Flexibility addresses the type of capacity and its flexibility characteristics. It is important to ensure the market design incentivizes the development of new flexible resources and, once they are built, their provision of flexibility via operational markets or other practices. NREL research investigates mechanisms that can influence more efficient use of available flexibility, incentivize resources to enhance or build flexibility, and ensure a reliable power system.
Ancillary services are those services, in addition to energy provision, that support power system reliability. Numerous ancillary services exist today, and in restructured markets, ancillary service markets ensure ancillary service requirements are met at least cost. NREL research investigates the design of these markets and how they may be changing on systems with new resources, including variable generation.
For More Information
For more information about NREL's work on electricity market design, see the following resources. Additional publications can be found in the NREL Publications Database.
Markets to Facilitate Wind and Solar Energy Integration in the Bulk Power Supply: An IEA Task 25 Collaboration
This report considers market issues associated with the integration of variable generation and presents potential mitigation measures.
Effective Ancillary Services Market Designs on High Wind Power Penetration Systems
This paper focuses on how ancillary service market designs are implemented and how they may require changes on systems with high penetrations of variable generation.
Participation of Wind Power in LMP-Based Energy Markets
This paper discusses the potential societal benefits of allowing the economic dispatch of wind generation when it may enhance reliability and be economically advantageous.