Electricity Market Design for Generator Revenue Sufficiency with Increased Variable Generation

Date Published: December 2015

Authors: Todd Levin, Audun Botterud

This paper models three different market policies for resource adequacy in power systems with increasing wind penetration. Three market policies are Operating Reserve Demand Curves (ORDC), Fixed Reserve Scarcity Prices (FRSP) and fixed capacity payments (CP). The paper compares generation capacity, average energy prices, relative profitability and generator revenues under different market policies and different levels of renewable energy penetration. As a conclusion, ORDC and FRSP show the same level of ability on resource adequacy in power systems. At the same time, a hybrid framework combining capacity payments which encourage long-term resource sufficiency and complementary ORDC framework which provides shorter-term operational incentives and promotes revenue sufficiency for all units should be considered.

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