NREL Report Identifies Research Needed to Address Power Market Design Challenges

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NREL and Argonne National Laboratory have published a new report, Evolution of Wholesale Electricity Market Design with Increasing Levels of Renewable Generation. This report provides an overview of the state-of-the-art of wholesale electricity market designs in the United States. It then focuses on two high-impact questions: (1) will reduced prices and sales in the energy market that result from low-cost renewables result in insufficient revenue for traditional plants needed for long-term reliability, and (2) are the short-term markets incentivizing resources to offer and provide flexibility to meet the increased variability and uncertainty of variable renewable resources. The report summarizes how the traditional market designs met these two challenges, and discusses the recent market design changes that have been implemented or proposed in part because of the increased penetrations of renewable resources in these markets. This report is the first of its kind on the topic of technical wholesale market design.

The study found that there are many different methods that address these two questions, but there is still a great amount of debate as to how well the markets are currently addressing them. The ways in which each market in the United States has evolved vary widely. The study recommends several research areas that can quantitatively assess how well the current markets meet the objectives of revenue sufficiency and flexibility incentives, and approaches that may help mitigate the market design issues that variable renewable generation brings.

This work was funded by the U.S. Department of Energy Wind and Water Power Technologies Office.