Market Design for System Security in Low-Carbon Electricity Grids: from the Physics to the Economics

Date Published: June 2020

Authors: Farhad Billimoria, Pierluigi Mancarella, Rahmatallah Poudineh

Shifts in the generation mix are presenting new challenges to system security as grids move away from turbine-based generation to inverter-based renewable energy. This report provides a detailed analysis of energy system security (i.e., maintaining grid stability and limiting disturbances) as an economic “basket of goods” with specific economic characteristics, rather than as a standard public good. The implications of this analysis of system security on market design is examined across five design models: (1) comprehensive central procurement; (2) decentralized procurement via cost or quantity allocation; and (3) decentralized access-driven procurement. In addition, two hybrid extensions are also assessed: (4) hybrid decentralized/centralized procurement; and (5) decentralized procurement with facilitated coordination.

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