Full Title: Who's the Buyer? Retail Electric Market Structure Reforms In Support Of Resource Adequacy and Clean Energy Deployment
Author(s): Rob Gramlich and Frank Lacey
Publisher(s): Wind Solar Alliance
Publication Date: March 18, 2020
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Who is responsible for ensuring the availability of generation resources to meet peak electricity demand in states with retail competition? Electricity markets in Texas, Australia, the UK, and New Zealand follow the approach in typical markets, where consumers themselves have procurement responsibility. In many states, there has never been a clear answer to the procurement question. In general, the “hybrid” retail competition models implemented outside of Texas have not placed a priority on long-term contracting for generation resources. No entity in those markets has both the incentive and ability to procure power, given the rules and structures currently in place. This omission contributes to a free-rider problem, or what is also labeled a public good or “missing money” problem, where supply is under-procured and under-paid. That is one reason RTOs in those areas stepped into the resource adequacy role with mandatory capacity markets. States have an opportunity to facilitate better resource procurement and benefit customers by ensuring there are entities equipped to hedge on behalf of customers, enabling less reliance on capacity markets.