Brattle principal Philip Hanser and senior associate Metin Celebi have authored a newsletter discussing the expanding and changing role of marginal cost studies in evolving power markets.

According to the authors, the utility industry is undergoing a significant transformation, and customers, regulators, and utilities need to better understand the various applications of marginal cost analyses. While marginal cost analyses have always been fundamental to the assessment and design of innovative rates and energy efficiency programs, they have also evolved as a key instrument in determining the costs and benefits of integrating renewable resources, customer-side generation, and innovative technologies. The newsletter discusses the issues associated with marginal cost studies in this changing environment, and describes how the analysis of marginal costs must take into account the increasing reliance on regional transmission organizations (RTOs) to provide some of the services and the larger role of demand resources in resource planning.

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