 Can wholesale electricity markets achieve resource adequacy and high clean energy generation targets in the presence of self-interested actors?Muhammad Bashar Anwar, Nongchao Guo, Yinong Sun and Bethany Frew Applied Energy, 2024, vol. 359, issue C, No S0306261924001570 Abstract: Wholesale electricity markets are intended to incentivize system generation investments and operations outcomes that meet evolving system needs. In this work, we evaluate the effectiveness of wholesale market structures, rules and policies in achieving system resource adequacy (RA) and clean energy targets in the presence of self-interested generation investors using the Electricity Markets and Investment Suite Agent-based Simulation (EMIS-AS) model. Results highlight that both capacity markets and operating reserve demand curves (ORDCs) can help achieve a reliable system but with different RA compliance timelines and distribution of generation technologies. Structures with capacity markets tend to favor more capital-intensive peaking technologies while reducing wind and solar build-outs due to suppressed energy and clean energy market prices, particularly in the absence of strong clean energy targets. Conversely, ORDCs improve the commitment of available generation units, but this comes at the expense of higher system costs and renewable generation curtailment. We also find that well-calibrated static capacity demand curves can yield similar reliability and total cost compared to capacity market demand curves informed dynamically by resource adequacy while also yielding stable annual capacity prices. Different approaches to formulating ORDC curves can also yield key trade-offs, namely that a more efficient treatment of storage chronology results in lower ORDC curves and prices, yielding less investment and cost but at the expense of reliability. Finally, the effectiveness of wholesale electricity markets in practically achieving very high clean energy generation targets highly depends on the cost-competitiveness of clean energy technologies that can support critical balancing needs across multiple timescales. Keywords: Competitive wholesale electricity market design; Capacity expansion; Resource adequacy; Capacity market; Operating reserve demand curve (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:appene:v:359:y:2024:i:c:s0306261924001570 Ordering information: This journal article can be ordered from DOI: 10.1016/j.apenergy.2024.122774 Access Statistics for this article Applied Energy is currently edited by J. Yan More articles in Applied Energy from Elsevier |
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