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Other Market Designs to Support Resource Adequacy

Brattle experts have deep experience evaluating the efficacy of energy-only market designs to support resource adequacy, and how such constructs compare with centralized capacity markets. Our experts have analyzed economically-optimal reserve margins, calculated target reserve margins, and compared market design options to improve resource adequacy. Our analysis often includes robust probabilistic modeling of system performance. Together, these assignments have given us a broad view of the best practices and critical aspects of generation investment challenges.

Engagements
REPRESENTATIVE ENGAGEMENTS

Below is a list of representative engagements for our Other Market Designs to Support Resource Adequacy practice.

Evaluation of investment incentives and resource adequacy in ERCOT

For ERCOT, Brattle experts characterized the factors influencing generation investment decisions, analyzed the energy market’s ability to support investment and resource adequacy at the target level based on probabilistic simulation analyses, and evaluated options to enhance long-term resource adequacy while maintaining market efficiency. We interviewed stakeholders and worked with ERCOT staff to understand the relevant aspects of their operations and market data. We performed probabilistic simulation analyses of prices, investment costs, and reliability. Our findings informed a Public Utility Commission of Texas (PUCT) proceeding in which Brattle experts filed comments and presented at several workshops. The findings ultimately led to ERCOT’s development of the Operating Reserve Demand Curve (ORDC).

FERC economics of reliability study

Brattle experts conducted a study on the economics of reliability for the Federal Energy Regulatory Commission (FERC) in conjunction with Astrape Consulting. One component of the study was the development and demonstration of an approach for estimating a value-based demand curve for capacity. The study also addressed other aspects of the economics of reliability, including: (a) the sensitivity of reliability-based reserve margins to study assumptions, reliability metric definitions, and system conditions; (b) the “economically optimal” reserve margin compared to reliability-based reserve margins; (c) the impacts of varying demand response (DR) penetration, wind penetration, load forecast error, and intertie levels; and (d) the price, system cost, and customer cost impacts of different energy and capacity market designs.

Evaluation of AESO's market design

Brattle evaluated the long-term sustainability of the Alberta Electric System Operator’s (AESO) energy-only market with respect to upcoming environmental and economic challenges. These challenges include the upcoming Canadian federal coal retirement mandate, worsening economics for coal generators, high load growth, and the expiration of PPAs on most of the generation fleet. The analysis included production cost simulations of the Alberta system under a variety of future scenarios. In 2013 we provided study updates to account for recent changes to policy and economic conditions.

Energy-only markets sustainability with renewables and climate policy
For an RTO, Brattle experts evaluated the effects of coal retirements and increasing wind penetrations on resource adequacy and sub-hourly system performance. Our analysis included probabilistic simulations of several resource adequacy metrics across varied reserve margins and wind penetrations. We analyzed the ability of an energy-only market design to attract new entry; we then found the resulting equilibrium reserve margin and level of resource adequacy. We simulated the implications of proposed market reforms on resource adequacy and operations, including increasing energy market price caps, capacity market reforms, and new ancillary services.
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