Market Design for the Evolving Grid

Funded research

Capacity adequacy options for electricity markets with increasing renewable penetration: equilibrium models and laboratory experiments

Sponsored by the National Science Foundation

Dr. Lo Prete received a Faculty Early Career Development Program (CAREER) award from the National Science Foundation to investigate electricity market structures to provide efficient incentives for generation capacity investment under increasing renewable penetration. The project seeks to develop a unifying framework to compare wholesale electricity market designs for resource adequacy and revenue sufficiency, The integration of equilibrium models and experimental economics is a unique feature of the proposed approach.

 

Electricity market structure, wind penetration and information aggregation 

Sponsored by the Alfred P. Sloan Foundation

Dr. Lo Prete was awarded a $250,000 grant for early career researchers from the Alfred P. Sloan Foundation to examine the effectiveness of energy market structures in aggregating private information on wind production forecasts to better coordinate commitment and production decisions in electric systems. (Role: PI. In collaboration with A. Kwasnica and M. Webster).

Related publications and work in progress

C. Hohl, C. Lo Prete, A. Radhakrishnan and M. Webster. “Intraday markets, wind integration and uplift in a regional U.S. power system”. Accepted for publication, Energy Policy, Working Paper, Appendix.

Abstract: U.S. electricity markets adopt a two-settlement structure with day-ahead and real-time markets. Wind power integration poses a challenge for this market structure because day-ahead wind production forecasts are uncertain and significant rescheduling costs may occur in real time, increasing the need for out-of-market uplift payments. We investigate whether a multi-settlement structure with four intraday stages taking place 18 to 3 hours before electricity generation reduces uplift payments and system costs, relative to a two-settlement structure. We develop unit commitment and dispatch models that account for intertemporal constraints and solve them on a 36-node test system using historical wind forecasts provided by a Regional Transmission Organization, as well as synthetic wind forecasts reproducing the observed correlation in the historical data. Combining historical and simulated forecasts allows us to account for wind uncertainty and draw more robust conclusions about the relative merits of each market structure. Finally, we compare the performance of market designs under varying levels of wind penetration. Under any level of wind penetration, the proposed multi-settlement market design is more likely to yield higher uplift than the two-settlement market design. Wind forecast accuracy and structural differences between the U.S. and European electricity markets are key drivers of our results.

Comparing two-settlement and multi-settlement market designs for wind integration: an experimental approach”. Work in progress with C. Hohl, J. Wu, A. Kwasnica, and F. Zhu.

 

Capacity markets versus energy-only markets: a comparison under increasing wind penetration”. Work in progress with C. Hohl.