Market evolution: Wholesale electricity market design for 21st century power systems

J. Cochran, M. Miller, M. Milligan, E. Ela, D. Arent, A. Bloom, M. Futch, Juha Kiviluoma, Hannele Holtinen, A. Orths, E. Gómez-Lázaro, S. Martín-Martínez, S. Kukoda, G. Garcia, K.M. Mikkelsen, Z. Yongqiang, K. Sandholt

    Research output: Book/ReportReport

    Abstract

    Demand for affordable, reliable, domestically sourced, and low-carbon electricity is on the rise. This growing demand is driven in part by evolving public policy priorities, especially reducing the health and environmental impacts of electricity service and expanding energy access to underserved customers. Consequently, variable renewable energy resources comprise an increasing share of electricity generation globally. At the same time, new opportunities for addressing the variability of renewables are being strengthened through advances in smart grids, communications, and technologies that enable dispatchable demand response and distributed generation to extend to the mass market. A key challenge of merging these opportunities is market design-determining how to create incentives and compensate providers justly for attributes and performance that ensure a reliable and secure grid in a context that fully realizes the potential of a broad array of sources of flexibility in both the wholesale power and retail markets. This report reviews the suite of wholesale power market designs in use and under consideration to ensure adequacy, security, and flexibility in a landscape of significant variable renewable energy. It also examines considerations needed to ensure that wholesale market designs are inclusive of emerging technologies, such as demand response, distributed generation, and distributed storage. The report concludes with a review of potential areas for future research on wholesale power markets. Well-designed markets encourage economically efficient solutions, promote innovation, and minimize unintended consequences. Yet, many uncertainties remain about how to achieve these aims in power markets, given the need to accommodate contextual constraints and effectively invite and sustain capital investments. There is an acute need for international collaboration on wholesale market design questions. The 21st Century Power Partnership aims to provide a platform for collaborative analysis, and the authors of this report sincerely hope that it lays the groundwork for future collaboration.
    Original languageEnglish
    Place of PublicationGolden
    Number of pages57
    DOIs
    Publication statusPublished - 2013
    MoE publication typeD4 Published development or research report or study

    Publication series

    SeriesNREL Technical Report
    NumberNREL/TP-6A20-57477

    Fingerprint

    Electricity
    Distributed power generation
    Renewable energy resources
    Merging
    Environmental impact
    Innovation
    Health
    Carbon
    Power markets
    Communication
    Uncertainty

    Cite this

    Cochran, J., Miller, M., Milligan, M., Ela, E., Arent, D., Bloom, A., ... Sandholt, K. (2013). Market evolution: Wholesale electricity market design for 21st century power systems. Golden. NREL Technical Report, No. NREL/TP-6A20-57477 https://doi.org/10.2172/1260327
    Cochran, J. ; Miller, M. ; Milligan, M. ; Ela, E. ; Arent, D. ; Bloom, A. ; Futch, M. ; Kiviluoma, Juha ; Holtinen, Hannele ; Orths, A. ; Gómez-Lázaro, E. ; Martín-Martínez, S. ; Kukoda, S. ; Garcia, G. ; Mikkelsen, K.M. ; Yongqiang, Z. ; Sandholt, K. / Market evolution : Wholesale electricity market design for 21st century power systems. Golden, 2013. 57 p. (NREL Technical Report; No. NREL/TP-6A20-57477).
    @book{5d36c783fb6b4ca68dcca5aa3c1fe3de,
    title = "Market evolution: Wholesale electricity market design for 21st century power systems",
    abstract = "Demand for affordable, reliable, domestically sourced, and low-carbon electricity is on the rise. This growing demand is driven in part by evolving public policy priorities, especially reducing the health and environmental impacts of electricity service and expanding energy access to underserved customers. Consequently, variable renewable energy resources comprise an increasing share of electricity generation globally. At the same time, new opportunities for addressing the variability of renewables are being strengthened through advances in smart grids, communications, and technologies that enable dispatchable demand response and distributed generation to extend to the mass market. A key challenge of merging these opportunities is market design-determining how to create incentives and compensate providers justly for attributes and performance that ensure a reliable and secure grid in a context that fully realizes the potential of a broad array of sources of flexibility in both the wholesale power and retail markets. This report reviews the suite of wholesale power market designs in use and under consideration to ensure adequacy, security, and flexibility in a landscape of significant variable renewable energy. It also examines considerations needed to ensure that wholesale market designs are inclusive of emerging technologies, such as demand response, distributed generation, and distributed storage. The report concludes with a review of potential areas for future research on wholesale power markets. Well-designed markets encourage economically efficient solutions, promote innovation, and minimize unintended consequences. Yet, many uncertainties remain about how to achieve these aims in power markets, given the need to accommodate contextual constraints and effectively invite and sustain capital investments. There is an acute need for international collaboration on wholesale market design questions. The 21st Century Power Partnership aims to provide a platform for collaborative analysis, and the authors of this report sincerely hope that it lays the groundwork for future collaboration.",
    author = "J. Cochran and M. Miller and M. Milligan and E. Ela and D. Arent and A. Bloom and M. Futch and Juha Kiviluoma and Hannele Holtinen and A. Orths and E. G{\'o}mez-L{\'a}zaro and S. Mart{\'i}n-Mart{\'i}nez and S. Kukoda and G. Garcia and K.M. Mikkelsen and Z. Yongqiang and K. Sandholt",
    note = "Project code: 79650",
    year = "2013",
    doi = "10.2172/1260327",
    language = "English",
    series = "NREL Technical Report",
    number = "NREL/TP-6A20-57477",

    }

    Cochran, J, Miller, M, Milligan, M, Ela, E, Arent, D, Bloom, A, Futch, M, Kiviluoma, J, Holtinen, H, Orths, A, Gómez-Lázaro, E, Martín-Martínez, S, Kukoda, S, Garcia, G, Mikkelsen, KM, Yongqiang, Z & Sandholt, K 2013, Market evolution: Wholesale electricity market design for 21st century power systems. NREL Technical Report, no. NREL/TP-6A20-57477, Golden. https://doi.org/10.2172/1260327

    Market evolution : Wholesale electricity market design for 21st century power systems. / Cochran, J.; Miller, M.; Milligan, M.; Ela, E.; Arent, D.; Bloom, A.; Futch, M.; Kiviluoma, Juha; Holtinen, Hannele; Orths, A.; Gómez-Lázaro, E.; Martín-Martínez, S.; Kukoda, S.; Garcia, G.; Mikkelsen, K.M.; Yongqiang, Z.; Sandholt, K.

    Golden, 2013. 57 p. (NREL Technical Report; No. NREL/TP-6A20-57477).

    Research output: Book/ReportReport

    TY - BOOK

    T1 - Market evolution

    T2 - Wholesale electricity market design for 21st century power systems

    AU - Cochran, J.

    AU - Miller, M.

    AU - Milligan, M.

    AU - Ela, E.

    AU - Arent, D.

    AU - Bloom, A.

    AU - Futch, M.

    AU - Kiviluoma, Juha

    AU - Holtinen, Hannele

    AU - Orths, A.

    AU - Gómez-Lázaro, E.

    AU - Martín-Martínez, S.

    AU - Kukoda, S.

    AU - Garcia, G.

    AU - Mikkelsen, K.M.

    AU - Yongqiang, Z.

    AU - Sandholt, K.

    N1 - Project code: 79650

    PY - 2013

    Y1 - 2013

    N2 - Demand for affordable, reliable, domestically sourced, and low-carbon electricity is on the rise. This growing demand is driven in part by evolving public policy priorities, especially reducing the health and environmental impacts of electricity service and expanding energy access to underserved customers. Consequently, variable renewable energy resources comprise an increasing share of electricity generation globally. At the same time, new opportunities for addressing the variability of renewables are being strengthened through advances in smart grids, communications, and technologies that enable dispatchable demand response and distributed generation to extend to the mass market. A key challenge of merging these opportunities is market design-determining how to create incentives and compensate providers justly for attributes and performance that ensure a reliable and secure grid in a context that fully realizes the potential of a broad array of sources of flexibility in both the wholesale power and retail markets. This report reviews the suite of wholesale power market designs in use and under consideration to ensure adequacy, security, and flexibility in a landscape of significant variable renewable energy. It also examines considerations needed to ensure that wholesale market designs are inclusive of emerging technologies, such as demand response, distributed generation, and distributed storage. The report concludes with a review of potential areas for future research on wholesale power markets. Well-designed markets encourage economically efficient solutions, promote innovation, and minimize unintended consequences. Yet, many uncertainties remain about how to achieve these aims in power markets, given the need to accommodate contextual constraints and effectively invite and sustain capital investments. There is an acute need for international collaboration on wholesale market design questions. The 21st Century Power Partnership aims to provide a platform for collaborative analysis, and the authors of this report sincerely hope that it lays the groundwork for future collaboration.

    AB - Demand for affordable, reliable, domestically sourced, and low-carbon electricity is on the rise. This growing demand is driven in part by evolving public policy priorities, especially reducing the health and environmental impacts of electricity service and expanding energy access to underserved customers. Consequently, variable renewable energy resources comprise an increasing share of electricity generation globally. At the same time, new opportunities for addressing the variability of renewables are being strengthened through advances in smart grids, communications, and technologies that enable dispatchable demand response and distributed generation to extend to the mass market. A key challenge of merging these opportunities is market design-determining how to create incentives and compensate providers justly for attributes and performance that ensure a reliable and secure grid in a context that fully realizes the potential of a broad array of sources of flexibility in both the wholesale power and retail markets. This report reviews the suite of wholesale power market designs in use and under consideration to ensure adequacy, security, and flexibility in a landscape of significant variable renewable energy. It also examines considerations needed to ensure that wholesale market designs are inclusive of emerging technologies, such as demand response, distributed generation, and distributed storage. The report concludes with a review of potential areas for future research on wholesale power markets. Well-designed markets encourage economically efficient solutions, promote innovation, and minimize unintended consequences. Yet, many uncertainties remain about how to achieve these aims in power markets, given the need to accommodate contextual constraints and effectively invite and sustain capital investments. There is an acute need for international collaboration on wholesale market design questions. The 21st Century Power Partnership aims to provide a platform for collaborative analysis, and the authors of this report sincerely hope that it lays the groundwork for future collaboration.

    U2 - 10.2172/1260327

    DO - 10.2172/1260327

    M3 - Report

    T3 - NREL Technical Report

    BT - Market evolution

    CY - Golden

    ER -

    Cochran J, Miller M, Milligan M, Ela E, Arent D, Bloom A et al. Market evolution: Wholesale electricity market design for 21st century power systems. Golden, 2013. 57 p. (NREL Technical Report; No. NREL/TP-6A20-57477). https://doi.org/10.2172/1260327