Alternative Trading Arrangements for Intermittent Renewable Power: A Centralised Renewables Market and Other Concepts

One of the issues identified by Ofgem’s Project Discovery was that imbalance prices may not rise sufficiently at times of high demand to elicit extra supply or demand response. A proposed solution is to sharpen the price signals, by making imbalance prices closer to the marginal cost of balancing actions. However, Project Discovery also recognised that such a move could reduce incentives to invest in intermittent sources of renewable energy – mainly wind, but perhaps also solar and wave. The output of such renewable sources is inherently difficult to forecast and they are therefore more exposed to imbalance charges.

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