Full Title: Evolution of Power Market Structures and Remuneration
Author(s): Beth LaRose and Ryan Fox
Publisher(s): GE Gas Power
Publication Date: November 20, 2022
Full Text: Download Resource
Description (excerpt):
This paper discusses the following key building blocks for successful competitive power markets to effectively help incentivize the needed characteristics of the changing mix of electric power technology, adequately pay for this investment, and help ensure a reliable, stable and resilient power grid.
1) Maintain wholesale energy markets based on locational marginal costs, either zonal or extended to nodal, to be paid to participating resources at the marginal market price, the last accepted offer.
2) Implement forward capacity markets or capacity remuneration schemes to pay for demonstrated, dependable capacity for required durations to provide signals for resource adequacy and sufficient long-term resource investments.
3) Add essential reliability support services that go beyond conventional ancillary services to pay for additional required resource features and capabilities required for secure system operations and grid stability. These include services such as fast frequency response, dispatch and operational flexibility, fast ramping resources, inertia, and voltage support.
4) Invest in demand-side infrastructure, digitization, and smart grid to further enable demand-side participation in power markets to enable the bi-directional grid.