未来能源研究所-是时候进行市场升级了吗？未来电力批发市场设计综述（英）

TimeforaMarketUpgrade?AReviewofWholesale

ElectricityMarketDesignsfortheFuture

ChiaraLoPrete,KarenPalmer,andMollyRobertson

Report24-09June2024

AbouttheAuthors

ChiaraLoPreteisAssociateProfessorofEnergyEconomicsintheJohnandWillie

LeoneFamilyDepartmentofEnergyandMineralEngineeringatThePennsylvania

StateUniversity.Herresearchcentersontheeconomicsofenergymarkets,with

afocusontheareasofcompetitionanddesignofelectricitymarkets,naturalgas

marketdesigntoenhancegridreliability,geopoliticsandenergysecurity,andthe

impactsofenvironmentalregulationsonelectricpowergeneration.Recentworkhas

centeredonthedevelopmentofmathematicalmodelsandapplicationofempirical

methodstostudyelectricitymarketstructuresforresourceadequacyandwindenergyintegration,interdependentnaturalgasandelectricpowersystems,theweaponizationofelectricitytrade,emissionleakageandcross-productmanipulation.

KarenPalmerisaseniorfellowatResourcesfortheFuture(RFF),directorofthe

ElectricPowerProgram,andanexpertontheeconomicsofenvironmental,climateandpublicutilityregulationoftheelectricpowersector.Herworkseekstoimprovethe

designofenvironmentalandtechnologyregulationsinthesectorandthedevelopmentofnewinstitutionstohelpguidetheongoingtransitionoftheelectricitysector.To

theseends,sheexploresclimatepolicydesign,analyzesefficientwaystopromote

useofrenewableandothercleansourcesofelectricity,andinvestigatesnewmarketdesigns,newapproachestoelectricitypricingandregulatoryreformstopavetheway

forlong-termdecarbonizationofelectricitysupplyandelectrificationoftheenergyeconomy.

MollyRobertsonisaseniorresearchassociateatRFFworkingontopicsrelated

totheelectricpowersector,includinggriddecarbonization,electrification,and

electricitymarketdesign.ShehasalsocontributedtoRFF’sgrowingworkonequitablecommunitytransitionandenvironmentaljustice.Sheholdsamaster’sinpublicpolicyfromtheUniversityofMichigan’sFordSchool.

Acknowledgements

KarenPalmerandMollyRobertsonwishtoacknowledgefundingfromtheRFFElectricPowerProgram.ChiaraLoPretewouldliketoacknowledgefundingfromtheNationalScienceFoundation(Grant1943992).WethankPeterCramton,StevenCorneli,NataliaFabra,EricGimon,MalcolmKeay,DavidNelson,BrendanPierpont,KathleenSpees,

LeighTesfatsion,andFrankWolakforhelpfulfeedback.WealsothankparticipantsintheElectricPowerInnovationinaCarbonFreeSociety(EPICS)Thrust3workshopforhelpfulcomments.

ResourcesfortheFuturei

AboutRFF

ResourcesfortheFuture(RFF)isanindependent,nonprofitresearchinstitutionin

Washington,DC.Itsmissionistoimproveenvironmental,energy,andnaturalresourcedecisionsthroughimpartialeconomicresearchandpolicyengagement.RFFis

committedtobeingthemostwidelytrustedsourceofresearchinsightsandpolicysolutionsleadingtoahealthyenvironmentandathrivingeconomy.

TheviewsexpressedherearethoseoftheindividualauthorsandmaydifferfromthoseofotherRFFexperts,itsofficers,oritsdirectors.

SharingOurWork

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NonCommercial-NoDerivatives4.0International(CCBY-NC-ND4.0)license.Youcancopyandredistributeourmaterialinanymediumorformat;youmustgive

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TimeforaMarketUpgrade?AReviewofWholesaleElectricityMarketDesignsfortheFutureii

Abstract

Existingwholesaleelectricitymarketdesignsarepoorlysuitedtoaddresschallengesassociatedwiththeevolvingresourcemix.Forexample,recentscarcityeventsin

theUnitedStatesshowthatreliabilitychallengesinrenewable-andgas-dominated

electricpowersystemsarisenotfromthelackofgenerationcapacitytoservepeak

customerdemand,butfromthelackofavailablecapacitytoprovidetherequisite

energyattimesofneed.Wereview11proposedelectricitymarketdesignsforthe

cleanenergytransitionandcomparethembasedon10criteria.Enhancingreliabilityinelectricpowersystemswithasignificantamountofvariablerenewableenergyrequiresincentivizingresourceflexibility,bothininvestmentandinoperation.Electricity

marketstructuresshouldallowresourcesneededforreliabilitytoearnadequate

revenuestorecovertheirvariableandfixedcosts.Goodmarketdesignsalsoenable

low-costfinancingtosupportinvestmentsincapital-intensiveresourcesthatare

instrumentalinmeetingdecarbonizationobjectives.Anadditionalpropertyofwell-

designedmarketsispromotingshort-runefficiencybyreducingincentivestoexercisemarketpowerandsupportingefficientrenewablecurtailmentoutcomes.Besides

achievingreliability,long-runefficiency,andshort-runefficiency,someproposalsin

ourreviewseektoachieveenergyaffordabilityobjectivesandintegrationwithclean

energygoals.Ourevaluationhighlightsseveralopenquestionsanddirectionsfor

futureresearch:thedeterminationofmandatorypurchaseobligationsofload-servingentitiesandassociatedenforcementmechanisms;theinterplaybetweenlong-term

hedgingrequirementsandincentivesfordemandparticipationinrealtime;andthe

compatibilitybetweenlong-termcontractdesignandefficientoperationsinshort-termenergymarkets.

ResourcesfortheFutureiii

Contents

1.Introduction1

2.TraditionalApproachestoResourceAdequacyandRevenueSufficiency5

2.1.ScarcityPricing5

2.2.CapacityRemunerationMechanisms6

2.2.1.CapacityPayments6

2.2.2.CapacityRequirements6

2.2.3.CapacityMarkets7

2.2.4.ReliabilityOptions7

2.2.5.StrategicReserves8

2.2.6.IncentivizingCapacityPerformance9

3.EvolvingMarketApproachestoSupportReliability,Flexibility,andPrice

Certainty10

3.1.FlexibleCapacityRequirements10

3.2.SeasonalForwardCapacityMarkets11

3.3.BasicGenerationService12

4.ProposedApproachestoMeettheChallengesoftheCleanEnergyTransition14

4.1.AnIntegratedCleanCapacityMarket14

4.2.StandardizedFixed-PriceForwardContracts16

4.3.AForwardEnergyMarketwithFlowTrading18

4.4.ATwo-PartMarketforEnergy21

4.5.AMarketforLong-TermEnergyContracts22

4.6.Long-TermContractsBasedontheAttributesofGenerationTechnologies24

4.7.Market-BasedIntegratedResourcePlanning26

4.8.AnOrganizedLong-TermMarket28

4.9.DualShort-TermMarketDesigns29

4.10.SwingContracts32

5.Discussion36

6.Conclusions41

References43

TimeforaMarketUpgrade?AReviewofWholesaleElectricityMarketDesignsfortheFutureiv

1.Introduction

Independentsystemoperators(ISOs),regionaltransmissionorganizations(RTOs),

andelectricutilitiesservingasbalancingauthoritiesmustensuretherearesufficient

resourcestomeettheelectricitydemandofend-usecustomersatalltimes,accountingforscheduledandreasonablyexpectedunscheduledoutagesofsystemelementsandsubjecttostandardindustrytargetsforlossofload,suchasthe“onedayintenyear”lossofloadexpectation1Thisconceptisreferredtoasresourceadequacy(NARUC,

2023;NERC,2013).

Toachieveresourceadequacy,bothtraditionallyregulatedandcompetitivewholesaleelectricitymarketshaveadoptedframeworkstoaddresstwowell-knownproblems:

themissingmoneyproblemandthemissingmarketproblem(Newbery,2016;Wolak,

2022).Themissingmoneyproblemarisesbecauserevenuesfromtheenergyand

ancillaryservicesmarketsarenotsufficienttoencourageadequateinvestmentin

newgenerationcapacity(CramtonandOckenfels,2012).Forexample,duringscarcityconditions,short-termenergypricesareunlikelytorisetopoliticallyunpalatablelevelsreflectingtheestimatedamountthatcustomerswouldbewillingtopaytoavoida

powerdisruption(RoquesandFinon,2017).Ontheotherhand,themissingmarket

problemresultsfromtheretailers’incentivetodelaytheirelectricitypurchasesto

theshort-termenergymarket.Thisarisesfortworeasons.First,pricecapsinthe

short-termenergymarketlimitthecostoffailingtoprocureadequateenergytomeetexpecteddemandbeforedelivery.Second,duringscarcityconditions,retailersare

randomlycurtailedregardlessoftheamountofenergyprocuredintheforwardmarket,creatinganincentivetounder-procureexpectedneedsintheforwardmarket(Wolak,2022).Thegapbetweenmaturitiesoflong-termcontracts(thatgenerallydonotextend

1InApril1996,theFederalEnergyRegulatoryAgency(FERC)issuedOrders888and889,whereitintroducedtheconceptofanISOto“operatethetransmissionsystemsofpublicutilitiesinamannerthatisindependentofanybusinessinterestinsalesorpurchasesofelectricpowerbythoseutilities”andtofacilitatenondiscriminatoryaccesstotheelectrictransmissiongrid.FERCOrder2000,issuedinDecember1999,encouragedtransmission-owningpublicutilitiestovoluntarilyformandparticipateinanRTOandestablishedasetof12technicalrequirementstoobtainRTOstatus.WhilesomedifferencesexistbetweenISOsandRTOs(forexample,ISOsareformedatthedirectionorrecommendationoftheFERCanddonotpetitiontheFERCforapprovalandthusmaynotmeettherequirementsneededtoholdthedesignationofRTO),theirbasicfunctionsarethesameandincludeoperatingtheelectricgridwithinadefinedregion,ensuringnondiscriminatoryaccess

totransmission,optimallydispatchinggenerationassetstokeepdemandandsupply

inbalance,administeringtheregion’swholesaleelectricitymarkets,andensuringgridreliability.Intherestofthepaper,wewilluseRTOstorefertobothtypesoforganizations.

TimeforaMarketUpgrade?AReviewofWholesaleElectricityMarketDesignsfortheFuture

1

beyondafewyears;Keppleretal.,2022)andtimeframesforinvestingingenerationcapacityincreasesthecostofcapitalanddistortstheenergymixtowardlesscapital-intensiveandlessriskygenerationtechnologies(NeuhoffandDeVries,2004).2

Resourceadequacyframeworksattempttoaddresstheseproblemsinvariousways.

Verticallyintegratedutilitiesoperatingintraditionallyregulatedmarketsadopta

centralizedprocurementframework.Indecentralizedprocurementregionslikethe

CaliforniaIndependentSystemOperator(CAISO)andSouthwestPowerPool(SPP),

load-servingentities(LSEs)haveanobligationtoindividuallyprocurethecapacity

theyneedtomeettheircustomers’demand.Obligationsaresubjecttoguidance

andstandardssetbyacentralauthority,butthereisnocentralbiddingprocess.The

ElectricReliabilityCouncilofTexas(ERCOT)reformeditsenergymarketsothatpeakpricesbetterreflectthescarcityofcapacity,whileotherregionslikeISONewEngland(ISO-NE),theMidcontinentIndependentSystemOperator(MISO),theNewYork

IndependentSystemOperator(NYISO),andPJMcreatedmechanismsthatprovide

additionalremunerationforcapacityontopofenergysalesthroughcentralizedforwardcapacitymarkets.

Despitemanydifferencesamongtheseapproaches,alltraditionalresourceadequacymechanismsfocusonprocuringsufficientgenerationcapacitytoservepeak

demandplusareservemargin.3Whilesuchapproacheshavebeensuccessfulat

maintainingresourceadequacyinthermalgeneration–dominatedsystemsunder

mostcontingencies,theyarepoorlysuitedtoaddresschallengesassociatedwiththe

evolvingresourcemix.Forexample,evidencefromrecentscarcityeventsintheUnitedStatesshowsthatreliabilitychallengesinrenewable-andgas-dominatedelectricpowersystemsarisenotfromthelackofgenerationcapacitytoservepeakcustomerdemand,butfromthelackofavailablecapacitytoprovidetherequisiteenergyattimesofneed.Inotherwords,supplyshortfallsareathigherriskofoccurringbecauseofinadequateenergytoservedemandduringnetdemandpeaks,ratherthanbecauseofinadequategenerationcapacitytosatisfysystemdemandpeaks(NERC,2020;ESIG,2021).

Highpenetrationofrenewableenergysourcesalsoexacerbatesthelong-standing

missingmoneyproblembecauseincreasedentryofvariableenergyresources(VERs)withnear-zeromarginalcostsdecreasestheamountofthermalgenerationcleared

fromthemerit-orderstackandinduceslowercapacityfactorsforthermalgenerators.Inaddition,energypricestendtobelower(onaverage)andmorevolatileasaresultofincreasingVERparticipation(Mallapragadaetal.,2023).Between2014and2020,

2Long-termcontractsaretradedonorganizedexchangeslikeIntercontinentalExchange(ICE,2024),butliquidityisconcentratedinshorterperiods,withonlysmallamounts

tradedmorethan2or3yearsout.Contractsformorethan5yearsarerareandusuallytradedoverthecounter.Asapointofreference,constructiontimesrangefrom2yearsforanaturalgascombinedcycleplantto3-4yearsforacoalplantto10yearsfora

nuclearplant,andagenerationunit’slifetimemaybe20ormoreyearsafterthefinalinvestmentdecision.

3Insomecases,capacitycommitmentshavesignificantlyexceededthetargetreservemargins,resultinginchronicover-procurementandnegativecostimpactsforthe

consumers(Wilsonetal.,2020).

ResourcesfortheFuture2

generationresourcesinsomeregionsoftheUnitedStateshaveobserveddiminishingenergymarketearningsandagreatercontributionofcapacitymarketrevenuestotherecoveryofinvestmentcosts(Figure1).4Thistrendisproblematicbecausecapacity

marketsdonotprovidethenecessaryincentivestoinvestinanadequateamountandmixofflexiblegenerationtomeetevolvingsystemneeds(PJMInterconnection,2017b).Additionally,pricevolatilitycreatesgreaterrevenueuncertaintyforvariableresources,whichinturnraisesfinancingcostsforcapital-intensivegeneratorssuchasrenewables(PierpontandNelson,2017).

Figure1.ComponentsofPJMPrice

Source:AuthorelaborationondatafromMonitoringAnalytics(2023a,2023c,2024).

Someresearchersandanalystsarguethatdeepdecarbonizationofelectricitysystemswillrequireashiftawayfromthetextbookelectricitymarketdesigninwhichlong-terminvestmentdecisionsaredrivenbyshort-termenergyprices.Forexample,Roques

andFinon(2017)suggestanevolutionofmarketdesigntowardahybridregimewhere“competitionforthemarket”vialong-termcontractstosupportinvestmentwould

befollowedby“competitioninthemarket”forshort-termdispatchandbalancing

operationsasatpresent.AnexampleofhybridmarketscombinesmandatesforLSEstoenterintolong-termbilateralpowerpurchaseagreements(PPAs)withrenewablepowergeneratorsandstorage(whichareoftenmediatedthroughcompetitive

procurementprograms;Joskow,2022)anddispatchofthenewgenerationcapacityinshort-runenergymarkets.Keppleretal.(2022)furtherelaborateonthemotivationforhybridmarkets.

4Theincreaseinenergymarketearningsobservedin2021and2022waslargelydrivenbytheupwardtrendinnaturalgasprices(EIA,2024).

TimeforaMarketUpgrade?AReviewofWholesaleElectricityMarketDesignsfortheFuture3

Thispaperpresentsareviewofelectricitymarketdesignstosupporttheclean

energytransition.Meetingsystemreliabilitychallengesassociatedwithincreasing

levelsofrenewablegenerationrequiresincentivizingresourceflexibility,bothin

investmentandinoperation.Electricitymarketstructuresshouldbedesignedto

allowresourcesneededforreliabilitytoearnsufficientrevenuestorecovertheirfixedandvariablecosts.Goodmarketdesignsshouldalsoenablelow-costfinancingto

supportinvestmentsincapital-intensiveresourcesthatareinstrumentalinmeetingdecarbonizationobjectives.Anadditionalpropertyofwell-designedmarketsis

promotingshort-runefficiencybyreducingincentivestoexercisemarketpowerandsupportingefficientrenewablecurtailmentoutcomes.Besidesreliability,long-run

efficiency,andshort-runefficiency,electricitymarketsmayseektoachieveequity

objectives(e.g.,lowercostsofrenewablegenerationmustbepassedthroughtoretailcustomers)andinsomecasesmaybeintegratedwithcleanenergygoals.

Ourworkbuildsonthreerecentreviewsofelectricitymarketdesign.Bhagwat,

DeVries,etal.(2016)surveyUScapacitymarketexpertswiththepurposeof

drawinglessonsfortheEUandconcludethatUScapacitymarketshaveachievedreliabilitygoalsinaneconomicallyinefficientmannerbecausetheytendtoleadtoexcessgenerationcapacity.Asaresult,consumershavenotbenefitedfromtheimplementationofcapacitymarketsintermsofloweroverallcosts.Bublitzetal.

(2019)discusscapacityremunerationmechanismsfromacrosstheglobeandreviewexperienceswiththem.Theynotethat“astheadequatedesigndependsonavarietyoffactorssuchastheexistingcapacitymixanddemandcharacteristics,nogeneral

advantageousnessofsingle(capacityremuneration)mechanismscouldbedeterminedsofar.…Nevertheless,itcanbeconcludedthatmarket-basedmechanisms,e.g.,a

forwardcapacitymarket,areusuallyadvantageouscomparedtointerventionist

mechanismssuchascapacitypayments”(2019,1074).Duggan(2020)reviewsthe

literaturethatevaluatestherelativeperformanceofvariouscapacitymechanisms,

includingthe“energy-only”marketapproach.HediscussesrecentdevelopmentsindifferentRTOmarkets,whichheconcludescollectivelyindicatethatexperimentationoncapacityremunerationforresourceadequacysupportisanongoingprocess.Wecontributetothisliteraturebybroadeningthefocustoincludeproposedelectricitymarketdesigns,andbyprovidingacomprehensivereviewandcomparisonoftheseoptionsbasedonkeymetrics.

Therestofthepaperproceedsasfollows.Thenextsectionreviewstraditional

approachestoensureresourceadequacyandrevenuesufficiency,includingscarcitypricingandarangeofcapacitymechanisms.Section3discussesevolvingUSmarketapproachestosupportreliability,incentivizeflexibility,andprovideforwardprice

certaintytomeetloadrequirementsofeligiblecustomers.Thepaperthenturnsin

Section4toadiscussionof11proposeddesignsthatofferpotentialsolutionsto

thechallengesfacedbyelectricitymarketsintheUnitedStatesandabroad.We

comparethedesignsbasedontheirpotentialabilitytosupportthedevelopmentofreliablemixesofgenerationresources,promoteefficientlong-andshort-runresourceallocation,andhelpachieveenergyaffordabilityanddecarbonizationobjectives.

Section5highlightsopenquestionsanddirectionsforfutureresearch.Section6providesconcludingremarks.

ResourcesfortheFuture4

2.TraditionalApproachestoResource

AdequacyandRevenueSufficiency

2.1.ScarcityPricing

AllRTOsintheUnitedStatesusesomeformofscarcitypricingtoincentivize

availabilityduringtimesofneed(Mehrtashetal.,2023).Scarcitypricingallowsenergyorancillaryservicespricestoriseabovetheaveragevariablecostofalloperating

plantswhenthesystemiscapacity-constrained.Insuchinstances,unitsearnashort-runprofit,knownasscarcityrent.Asufficientnumberofscarcityhourswouldincreasethecumulativescarcityrentsearnedbyoperatingunits,andfirmswouldinvestin

newcapacityaslongastheexpectedcumulativescarcityrentsexceededthecosts

ofbuildingnewcapacity(Bublitzetal.,2019).However,theexistenceofpricecaps

andlackofshort-termprice-responsivedemandposepracticalchallengesinthe

implementationofscarcitypricinginreal-worldelectricitymarkets.Toaddressthese

challenges,marketshaveamendedtheirpricingmechanismstogeneratehighprices

whenoperatingreservesarescarce.Forexample,inERCOT,theonlygridoperatorin

theUnitedStatesthatreliesonan“energy-only”market,pricesforbothenergyand

ancillaryservicesriseabovetheofferpricesofgenerationunitswhenreservemarginsarelow.Pricesintimesofscarcityarebasedonanoperatingreservedemandcurvethatreflectsthesystemoperator’sdemandforreserves(Hogan,2005).5Thismechanism

providesincentivesfortheperformanceofgenerationcapacityundermostoperatingconditions(PotomacEconomics,2021),althoughaftertheFebruary2021outagesinTexas,criticsarguedthattheenergy-onlyparadigmfailstoensureadequatelevelsofinstalledcapacityandmaintainreliabilityunderstressconditions(Borreson,2022).6

Aspartoftheredesignofthestate’senergy-onlymarketinthewakeofWinterStormUri,inJanuary2023thePublicUtilityCommissionofTexas(PUCT)endorsedthe

performancecreditmechanism(PCM)toincentivizegeneratorstobeavailableduringtimesofhighdemand.Thenewmarketmechanismawardscreditstogeneratorsattheendofacomplianceperiod,basedontheiravailabilityattimesofgridstress.Utilitieshaveanobligationtopurchasecreditsbasedontheirshareofsystemloadduringhighreliabilityriskhours.InFebruary2024,ERCOTfiledamemorandumlayingoutoptionsfordesignparametersandaproposedevaluationmethodologytoselectthefinal

parameters(PUCT,2024).ThePUCTisexpectedtoadoptrulesregardingPCMinthefirsthalfof2025.

5ERCOTdoesnotcurrentlyco-optimizeprovisionofenergyandoperatingreservesinrealtime,althoughco-optimizationisexpectedtobeimplementedby2025(Mehrtashetal.,2023).Asaresult,thereservepriceisdeterminedexpostandaddedtothereal-time

energypricetoprovideadditionalrevenuestorecoverfixedandvariablecosts.

6Itisunclearwhetheranyalternativemarketstructureswouldhaveprovidedbetter

incentivesforpowersupplierstoweatherizeagainsttheextremecold-weatherconditionsobservedinTexas,relativetoan“energy-only”market(Busbyetal.,2021;Palmerand

Cleary,2021).

TimeforaMarketUpgrade?AReviewofWholesaleElectricityMarketDesignsfortheFuture

5

2.2.CapacityRemunerationMechanisms

Inadditiontoscarcitypricing,resourceadequacyconcernsmayalsobeaddressedthroughcapacityremunerationmechanismswherebygenerationunitsearnrevenuestreamsforcapacityinadditiontorevenuesearnedthroughthesaleofenergyandancillaryservices.Awiderangeofoptionsincludescapacitypayments,capacity

requirements,capacitymarkets,reliabilityoptions,andstrategicreserves.

2.2.1.CapacityPayments

Capacitypaymentsawardgeneratorsanadministrativelydeterminedpriceforcapacitymadeavailabletothesystem.ThesemechanismshavebeeninplaceforyearsinSpain,Italy,Greece,Chile,Colombia,Peru,andSouthKorea,andtheymaybefixedorvariable,aswellastargeted(i.e.,paidexclusivelytonewgenerationcapacity)ormarket-wide

(i.e.,paidtobothnewandexistinggenerationcapacity).Absentacompetitiveprocess,themajorchallengeistheidentificationofthecorrectleveloftheper-unitcapacity

payment.Capacitypaymentsarethereforelikelytobetheleastefficienttypeofcapacitymechanism(EuropeanCommission,2016).

2.2.2.CapacityRequirements

InsomeregionsoftheUnitedStates(CAISOandSPP),capacityrequirementsmandatethatLSEsprocureanadministrativelydeterminedquantityofcapacityfromgenera