Report, NERC Special. Reliability Impacts of Climate Change Initiatives: Technology Assessment and Scenario Development . NERC. North America Electric Reliability Corporartion, 2010.Abstract

    Climate change initiatives proposed by governments and industry organizations will affect the way energy is used in North America. The aggressiveness or pace of mandates/targets affects near-term and long-term outcomes and the rate of new technology deployments. This report assesses the status and reliability effects from integrating new technologies promulgated by climate change initiatives as well as develops a framework for scenario assessment.

    Evans, Lewis,, and Kevin Counsell. “Options Provided by Storage Can Explain High Electricity Prices.” In, 2006.Abstract

    Generators supplying electricity markets are subject to volatile input and output prices and uncertain fuel availability. Price-risk may be hedged to a considerable extent but fuel-risk — water flows in the case of hydro and gas availability in the case of thermal plants — may not be. We show that a price-taking generator will only generate when the output price exceeds its marginal cost by an amount that reflects the value of the option to delay the use of stored fuel. The corresponding offer price is different from the theorized offer prices of static uniform auctions and more akin to pay-as-bid auction prices. We argue that the option value of delaying fuel use, which is an increasing function of spot price volatility and the uncertainty about fuel availability, must be considered when evaluating whether market power is present in electricity markets. The engineering approach to simulating an electricity supply curve, which has been used in market power evaluations to date, may lead to supply curves that are quite different from those that recognize possible fuel availability limitations, even in the complete absence of market power.

    Joskow, Paul. “Patterns of Transmission Investment.” In, 2005. Publisher's VersionAbstract

    This paper examines a number of issues associated with alternative analytical approaches for evaluating investments in electricity transmission infrastructure and alternative institutional arrangements to govern network operation, maintenance and investment. The economic and physical attributes of different types of transmission investments are identified and discussed. Alternative organizational and regulatory structures and their attributes are presented. The relationships between transmission investments driven by opportunities to reduce congestion and loss costs and transmission investment driven by traditional engineering reliability criteria are discussed. Reliability rules play a much more important role in transmission investment decisions today than do economic investment criteria as depicted in standard economic models of transmission networks. These models fail to capture key aspects of transmission operating and investment behavior that are heavily influenced by uncertainty, contingency criteria and associated engineering reliability rules. I illustrate how the wholesale market and transmission investment frameworks have addressed these issues in England and Wales (E&W) since 1990 and in the PJM Regional Transmission Organization (RTO) in the U.S. since 2000. I argue that economic and reliability-based criteria for transmission investment are fundamentally interdependent. Ignoring these interdependencies will have adverse effects on the efficiency of investment in transmission infrastructure and undermine the success of electricity market liberalization.

    of PIRGs, National Association State. “Toward a Consumer-Oriented Electric System: Assuring Affordability, Reliability, Accountability and Balance After a Decade of Restructuring.” In, 2004. Publisher's VersionAbstract

    Excerpt from the Executive Summary:

    In this paper, we present a consumers-eye view of the current regulatory structure of the electric in- dustry, the experience of the past decade of restructuring, and the critical prob- lems facing the industry today. We also propose a series of guiding principles and policy options for protecting the in- terests of electricity consumers, and map out a long-term vision in which a shift to a more balanced mix of cleaner en- ergy options leads to long-term cost sav- ings for consumers.

    Hogan, William W.Looking Ahead to National Legislation: Ensuring Reliability in a Competitive Market.” In, 1998. Publisher's VersionAbstract

    Executive Summary:

    Electricity markets employ open access and non‐discrimination to foster competition, market entry, and innovation.    The physical characteristics of the electricity system require explicit consideration of key elements in electricity market design.  Pricing and settlement rules for the real‐time market must provide efficient incentives, both for short‐term operations and long‐run investment. The ERCOT energy‐only market design emphasizes the need to get the real‐time prices right.    The recent innovation of the ERCOT Operating Reserve Demand Curve (ORDC) addressed the fundamental problem of inadequate region‐wide scarcity pricing that has plagued other organized markets, which have exhibited inadequate incentives both for reliable operations and efficient investment. 

    ERCOT employs an open wholesale electricity market as the basis for short‐term reliable electricity supply as well as for long‐term investments to maintain reliability in the future.  A review of energy price formation in ERCOT leads to two important conclusions: (i) while the ORDC is performing consistently within its design, scarcity price formation is being adversely influenced by factors not contemplated by the ORDC; (ii) other aspects of the ERCOT market design must be improved to better maintain private market response to energy prices as the driver of resource investment, maintenance expenditure and retirement decisions.   

    The paper identifies three general issues that have affected ERCOT energy prices in recent years, and recommends policy and price formation improvements consistent with efficient market design. These recommendations cannot reverse the impact of broader economic trends, such as low natural gas prices, or national policies, such as subsidies for investments in renewable resources.  However, the stress of these forces has exposed areas where there is a need for adjustments to pricing rules and policies within ERCOT.