Wholesale Electricity Market Design For Rapid Decarbonization Long-Term Markets Working With Short-Term Energy Markets
Date Published: June 2019
Authors: Steven Corneli, Eric Gimon, Brendan Pierpont
This paper focuses on a centralized market structure to procure an efficient portfolio and ensure ample long term financing of clean energy resources in competitive markets. In the authors’ view, current market designs with high levels of variable renewable energy resources with negligible short-run marginal costs face a serious risk of failing to produce market price signals sufficient to sustain the investment needed for successful decarbonization of the electricity system. The authors see a growing need for adding a coordinated central long-term procurement mechanism to today’s short-term spot markets.
Three long-term market proposals are presented. They share six core features:
- Long-term contracts, power purchase agreements, or offtake agreements for all projects for which price risk otherwise inhibits or limits low-cost financing.
- Voluntary participation, by resources seeking mitigation of price risk, in competition to meet the market’s objectives.
- Coordination and co-evolution with the short-term market.
- Incremental and innovation-supporting implementation.
- Greater cooperation with an optimization of policy guidance.
- Incremental development and implementation pathways.
The paper has three different variants that differ on portfolio selection, scope, and products and pricing