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Michael HoganSenior AdvisorThe Regulatory Assistance Project (RAP)®
Rue de la Science 23B-1040 BrusselsBelgium
February 26-28, 2018
Energy Innovation/Hewlett Foundation WorkshopGolden, Colorado
Wholesale Market Design for a Low-Carbon Power System
Regulatory Assistance Project (RAP)®
• Support needed, fit-for-purpose investment under radical uncertainty
• Operate the system efficiently• Deliver the desired energy mix at least cost• Meet an optimal standard of reliability & resiliency• Mobilize all economic options, including demand• Compensate consumers for the value they provide
2
The market design challenge for a near-zero-carbon power system:
Regulatory Assistance Project (RAP)®
• Current market design ≠ current market practice • SCED with LMP market designed to pay needed
investment & drive efficient dispatch…• …yes, even with low/zero production costs• Value of investment in flexibility best seen in varying
real-time supply/demand for energy & services• On eve of revolution in electrification & controllable
demand, are we really going to gut energy prices?3
Why jump from a perfectly good airplane?
market will struggle to
especially with
Regulatory Assistance Project (RAP)® 4
System services not capacity
Regulatory Assistance Project (RAP)® 5
Flexibility comes in many colors
Regulatory Assistance Project (RAP)® 6
System services = Capabilities
Regulatory Assistance Project (RAP)® 7
The evolution of price formation
Regulatory Assistance Project (RAP)® 8
Scarcity amidst plenty
Source: CAISO via Calpine
Regulatory Assistance Project (RAP)® 9
So what’s the real marginal cost?
Source: Brattle Group
Regulatory Assistance Project (RAP)® 10
The false premise…
Regulatory Assistance Project (RAP)® 11
…vs getting energy price right…
Regulatory Assistance Project (RAP)® 12
…and realizing the real promise
Where the value of most DR lives
Regulatory Assistance Project (RAP)® 13
Price duration with 70% RES
Source: Ea Analyses for Orsted
Regulatory Assistance Project (RAP)® 14
Discuss!
MichaelSenior AdvisorThe Regulatory Assistance Project (RAP)®
Rue de la Science 23B-1040 BrusselsBelgium
About RAPThe Regulatory Assistance Project (RAP)® is an independent, non-partisan, non-governmental organization dedicated to accelerating the transition to a clean, reliable, and efficient energy future.
Learn more about our work at raponline.org
Regulatory Assistance Project (RAP)® 16Source: Brattle Group
Regulatory Assistance Project (RAP)® 17
Low wholesale market prices?
Regulatory Assistance Project (RAP)® 18
Is there a dispatch problem?
Source: (1) CPI (B. Pierpont), (2) ERCOT
-
20
40
60
80
100
120
140
160
180
0 15,000 30,000 45,000 60,000 75,000 90,000Cumulative Capacity (MW)
Full
Load
Cos
ts ($
/MW
h)
Median Load34,821 MW
Max Load65,531 MW
Min Load21,385 MW
Bosque CC2
Bosque CC1