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The Brattle Group has more than a decade of experience analyzing and designing capacity markets. Our work has focused on the aspects of market design in greatest flux, including close analysis of capacity market developments in PJM, ISO New England, the Midcontinent Independent System Operator (MISO), and other international markets. Our experience in capacity market design includes designing demand curves, analyzing the cost of new entry, and designing market power mitigation frameworks. Through our in-depth work in these markets, we’ve become recognized experts in assessing the trade-offs between reliability, costs, and risks in capacity market design and what characteristics make capacity markets most successful.

Engagements
REPRESENTATIVE ENGAGEMENTS

Below is a list of representative engagements for our Capacity Markets practice.

Review of PJM capacity market
Brattle experts have led three tri-annual reviews of PJM’s Reliability Pricing Model (RPM). Our experts analyzed capacity auction results and response to market fundamentals. These studies addressed key market design elements and recommended improvements to reduce pricing uncertainty, safeguard future performance, and address mitigation of capacity market bids. This engagement also involved interviewing stakeholders and documenting concerns. In another engagement, Brattle experts prepared a whitepaper comparing the RPM with alternative power market designs and evaluated each design’s ability to maintain resource adequacy, summarized relevant U.S. and international experience, and discussed the advantages and disadvantages of the various approaches.
ISO New England capacity demand curve
For ISO New England, Brattle worked with staff and stakeholders to develop a selection of capacity demand curves and evaluate them for their efficiency and reliability performance. Our experts began with a review of lessons learned from other markets and an assessment of different potential design objectives. We then developed and implemented a statistical simulation model to evaluate probabilistic reliability, price, and reserve margin outcomes in a locational capacity market context under different candidate demand curve shapes.
Western Australia capacity market design
For the Public Utilities Office (PUO) of Western Australia, Brattle experts provided advice on the design and implementation of a competitive capacity market construct. Our experts reviewed the overall design proposed by the PUO and evaluated options for the design of auction parameters such as the demand curve. Brattle recommended approaches to developing robust supplier-side and buyer-side market power mitigation constructs. Our experts also provided recommendations on the design of administrative processes needed to conduct the auction and the governance of such processes.
MISO capacity market redesign: designing and evaluating competitive retail solutions
On behalf of MISO and its stakeholders, Brattle has supported the process of designing forward capacity market auctions for meeting the needs of MISO’s competitive retail choice loads. We have assisted in a range of ways including: (a) informal support to MISO staff, providing answers to questions, drafting stakeholder materials and memos evaluating various market design options, documenting and comparing other markets’ rules, and compiling data on other markets’ results; (b) formal support through presentations on specific topics including evaluating options for individual market design elements such as forward period, demand curve shape, auction format, locational transmission modeling, and detailed education on other markets’ designs; (c) gathering stakeholder input through interviews and collecting comments; (d) drafting or redlining tariff language and regulatory filings; and (e) developing independent public reports.
ERCOT economically-optimal reserve margin
For the Public Utility Commission of Texas (PUCT) and the Electric Reliability Council of Texas (ERCOT), Brattle co-authored a report estimating the economically-optimal reserve margin compared to various reliability-based reserve margins, and evaluated the cost and uncertainty of an energy-only and a potential capacity market in ERCOT. The simulations incorporated a detailed representation of the Texas power market, including intermittent wind and solar generation, operating reserves, different types of demand response, the full range of emergency procedures (such as operating reserve deletion), scarcity pricing provisions, and load-shed events.
Western Australia reserve capacity mechanism
For EnerNOC, Brattle experts evaluated the characteristics of the Western Australia Reserve Capacity Mechanism in comparison with international best practices and made recommendations for improvements. We also evaluated the advantages and disadvantages of a revised capacity market compared to adopting an energy-only market design in the region.
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