Publications

Electricity markets support open access and non-discrimination to allow competition, entry, and innovation. Investment and operation in the competitive sectors follow the incentives induced by prices. To achieve the intended outcomes of reliability and economic efficiency, it is important to have efficient prices that are consistent with the objectives and operation of the underlying system. The basic design of successful organized electricity markets, built on the principles of bid-based, security-constrained economic dispatch, goes a long way towards meeting this objective. However, the real electricity system involves features that are difficult or impossible to fully reconcile within this core model. This calls for an application of the principles of dispatched-based pricing to move as far as possible to achieving the ideal of efficient pricing and minimizing the need for additional payments through uplift and other interventions to maintain reliability. The challenge is constantly present to match the prices to reflect the actual changing conditions of the dispatch. Motivated by issues under review in New England, a summary of the basic principles and illustrative applications provides examples of seeking the first-best efficient prices to mitigate the unintended consequences of second-best out-of-market payments.

Hogan, William. Electricity Scarcity Pricing and Resource Adequacy." Presentation to the Harvard Electricity Policy Group, 74th Plenary Session, Santa Monica, CA, February 27, 2014."

The Commonwealth of Massachsuetts, Department of Public Utilities. Investigation by the Department of Public Utilities upon its own Motion into Time Varying Rates. June 2014.

Fallon, John, Michael S. Blake and Daniel Kelley. Regulatory Objectives and Pricing Principles." Network, issue 50, March 2014."

Electricity prices that describe marginal costs can vary substantially over time. Fixed rates ignore changing electricity system conditions. Setting prices that differ for certain periods is an approach to approximating the real-time price. If such time-of-use prices are set in advance, they will necessarily miss the full variability of real real-time prices. A simple index indicates that even very good time-of-use rates would miss the majority of the efficiency gain that would result with use of actual real-time prices.

ERCOT. About the Operating Reserve Demand Curve and Wholesale Electric Prices." May, 2014."

O'Neill, Richard. Diversity Challenges in Electricity Markets." Presentation to the Harvard Electricity Policy Group 77th Plenary Session, New Orleans, LA, December 2014."

Morey, Mathew, Laurence Kirsch, B. Kelly Eakin, and Robert Camfield. Ensuring Adequate Power Supplies for Tomorrow's Electricity Needs." Report to Electric Markets Research Foundation, June 2014."

The Brattle Group. Estimating the Economically Optimal Reserve Margin in ERCOT." Prepared for the Public Utility Commission of Texas. January 31, 2014."

Keppler, Jan Horst. First Principles, Market Failures and Endogenous Obsolescence: The Dynamic Approach to Capacity Mechanisms." Chaire European Electricity Markets, Universit̩ Paris-Dauphine, November 2014."

Linde, Tamara. Keeping the Lights On: Security Priorities for the 21st Century." Presentation to the Harvard Electricity Policy Group 75th Plenary Session, Cambridge, MA, June 2014."

Allen, Bill. Maintaining Resource and Price Diversity in a Competitive Market." Presentation to the Harvard Electricity Policy Group 77th Plenary Session, New Orleans, LA, December 2014."

Dominguez, Joseph. Market-Based Policy Concepts for Encouraging Fuel Diversity and Retaining Baseload Zero- Carbon Resources." Presentation to the Harvard Electricity Policy Group 77th Plenary Session, New Orleans, LA, December 2014."

American Public Power Association. Power Plants Are Not Built on Spec: 2014 Update." 2014."

Edelston, Bruce. ‰ÛÏResource Adequacy Reconsidered: Mandates and Markets. Presentation to the Harvard Electricity Policy Group 77th Plenary Session, New Orleans, LA, December 2014."

Kelly, Susan. Thinking Outside the Capacity "Markets" Box: Resource Adequacy Reconsidered: Mandates and Markets." Presentation to the Harvard Electricity Policy Group 77th Plenary Session, New Orleans, LA, December 2014."

Makovich, Lawrence. The Value of US Power Supply Diversity." Presentation to the Harvard Electricity Policy Group 77th Plenary Session, New Orleans, LA, December 2014."

Dolan, Dan. "Energy and Capacity Markets: Carts and Horses in Parallel Universes." Presentation to the Harvard Electricity Policy Group, 74th Plenary Session, Santa Monica, CA, February 27, 2014.

Pfeifenberger, Hannes. "Energy and Capacity Markets: Tradeoffs in Reliability, Costs, and Risks. " Presentation to the Harvard Electricity Policy Group, 74th Plenary Session, Santa Monica, CA, February 27, 2014.

Keppler, Jan Horst. "First Principles, Market Failures and Endogenous Obsolescence: The Dynamic Approach to Capacity Mechanisms." Chaire European Electricity Markets, Université Paris-Dauphine, November 2014.