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September 23, 2010
Brattle Recommends Changes to British and Spanish Power Market Design to Meet Resource Adequacy and Low Carbon Objectives

A report by economists at The Brattle Group recommends reforms to the British and Spanish power markets that would help to achieve both resource adequacy and government-mandated carbon reduction objectives. The findings were presented by Brattle principal Serena Hesmondhalgh during a session on investment incentives in electricity markets at the 8th British Institute of Energy Economics (BIEE) Academic Conference in Oxford. The analysis draws on international experience to evaluate how different wholesale market models deal with the dual objectives, and concludes that all market models face a growing challenge to ensure resource adequacy in the presence of low carbon policy objectives. The authors illustrate their findings by referring to the challenges facing Spain and Great Britain (GB). While Spain is suffering from an excess of capacity, GB may be facing a capacity shortage. However, both markets need to continue building renewables in order to meet their EU targets. The authors recommend that both Spain and GB introduce resource adequacy markets to ensure that sufficient operating reserves (including demand response) are available to cope with an increasing share of intermittent generation – an important issue that was identified in their analyses of low carbon objectives under all market models. The paper, "Resource Adequacy and Renewable Energy in Competitive Wholesale Electricity Markets," was written by Brattle principals Serena Hesmondhalgh, Johannes Pfeifenberger and David Robinson. Follow the link below to download the report.