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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 and simulation analysis of PJM's capacity demand curve

For PJM, we conducted all four official reviews of its Reliability Pricing Model (2008, 2011, 2014, and 2018). We evaluated the demand curve shape, the CONE parameter, and the methodology for estimating net energy and ancillary services revenues. We recommended improvements to support participation and competition, avoid excessive price volatility, and safeguard future reliability performance. We submitted testimony before the FERC and participated in settlement discussions.

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

For MISO, we evaluated design alternatives for accommodating the differing needs of states relying on competitive retail choice and integrated resource planning. We conducted probabilistic simulations of likely market results under alternative market designs and demand curves.  We also provided expert support in stakeholder forums and submitted expert testimony before the FERC.

ERCOT economically-optimal reserve margin

For the PUCT and 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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