Market design

Issues

New technologies and evolving economics have changed America’s power system. Unfortunately, the rules governing how electricity is bought and sold are outdated. Transforming wholesale electricity markets for the 21st century clean energy economy will result in more affordable, reliable, cleaner power.

A changing resource mix means updating market rules.

Updating market rules to reflect the realities of a system with ever-increasing amounts of wind, solar, and storage online will improve electric grid reliability, affordability, resiliency, and efficiency.

Wind, solar, and battery storage are inverter-based resources, meaning they connect to the grid through power electronics that convert Direct Current to the Alternating Current used on most of the country’s power system. Therefore, wind and solar have different operating characteristics from conventional resources.

These characteristics provide important services that help make the grid more reliable. For example, wind and solar have attributes that allow for faster, more controllable responses for regulating system frequency and voltage and riding through grid disturbances—in essence they can help the grid recover faster when problems occur.

Changing consumer energy uses and the growth of variable renewable generation are also changing patterns in electricity supply and demand. And as energy storage technologies proliferate, they will change the competitiveness of both renewable and conventional resources, while offering more tools for flexible, reliable grid management. At the same time, the electrification of many energy uses that now consume other fuels directly (e.g., transportation, building and water heating, industrial processes) could increase and transform electric loads in unexpected ways.

Right now, wholesale electricity markets are set up in ways that don’t account for many of these factors.

The North American Electric Reliability Corporation (NERC), the Federal Energy Regulatory Commission (FERC) and each Regional Transmission Organization/Independent System Operator (RTO/ISO), will each play a role in designing a market that accurately reflects the reality of today’s system. FERC-approved RTO market rules and tariff provisions, and NERC and regional reliability standards and guidelines, were all designed around conventional power plants and grid operations. However, many current rules and standards do not account for inverter-based generation sources like wind and solar, the fastest-growing types of new electric generating capacity in the U.S. Nor do they account for battery storage, which is set to grow exponentially in the coming years.

Wholesale electricity markets benefit consumers, and should fully value clean energy.

Clean energy & electricity markets

Electricity markets encourage competition, delivering access to the most affordable electricity sources for families and businesses. Markets also value essential reliability services, functions needed to keep the system reliable. Clean energy technologies are capable of providing many of these services, but barriers currently exist that prevent the market from fully recognizing them.

Competition is good for consumers

Electricity markets promote competition, save money, and improve reliability.

Clean power is reliable

Clean power can provide essential reliability services like frequency response, voltage and reactive power support, disturbance ride-through, frequency regulation, and operating reserves.

Grid operators already integrate clean power

Large amounts of clean energy are successfully integrated in places like the Midwest, Colorado, and Texas. At times wind provides over 60% of total system electricity, and grid operators keep the system reliable.

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