The Department of Energy released its Staff Report to the Secretary on Electricity Markets and Reliability.

Among its recommendations, which would serve to increase wholesale energy prices themselves or otherwise increase compensation to capacity owners via new products (presumably mandated for LSEs), are:

• "Wholesale markets: FERC should expedite its efforts with states, RTO/ISOs, and other stakeholders to improve energy price formation in centrally-organized wholesale electricity markets. After several years of fact finding and technical conferences, the record now supports energy price formation reform, such as the proposals laid out by PJM and others. Further, negative offers should be mitigated to the broadest extent possible."

• "Valuation of Essential Reliability Services (ERS): Where feasible and within its statutory authority, FERC should study and make recommendations regarding efforts to require valuation of new and existing ERS by creating fuel-neutral markets and/or regulatory mechanisms that compensate grid participants for services that are necessary to support reliable grid operations. Pricing mechanisms or regulations should be fuel and technology neutral and centered on the reliability services provided." [emphasis added]

The report also suggests several areas for further research, including:

• "Study mechanisms for enabling equitable, value-based remuneration for desired grid attributes -- such as ERS, fuel availability, high resilience, low emissions, flexibility, etc. -- with alternative market and non-market structures. This research could assess potentially under-recognized contributions from baseload power plants, using fuel-neutral metrics and values relevant to analyze all resource options."

• "Evaluate ongoing capacity market reforms. Several of the Nation’s electricity markets use mandatory capacity markets to procure capacity for future years and ensure resource adequacy. The design of these constructs has been the subject of near-constant debate within the RTO/ISOs and before FERC. After undergoing substantial changes from 2014–2015, capacity markets have come under new scrutiny in light of recent actions by restructured states to preserve or promote certain resources or resource types and to further state policy goals."

• "Explore market operations in a higher VRE [variable renewable energy]/low marginal cost system, and examine recent changes in energy price trends—including the drivers of wholesale electricity prices in the context of limited load growth—quantifying the relative contributions of fossil fuel prices. With significant amounts of near-zero marginal cost generation available, security-constrained economic dispatch of BPS based on marginal costs may not sufficiently compensate resources for all fixed and variable costs. Academic and other research should be expanded in this area, to include capacity market reforms and the role of capacity markets in a higher VRE/low marginal cost system."

See the Staff report here

The final Staff report strikes language from an earlier, unpublished draft that had attempted to claim that ERCOT's adoption of the ORDC made its resource adequacy approach "similar" to that of PJM (see discussion here)

Tags:
Wholesale   Capacity Markets   DOE   FERC  

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