Time to dump energy markets and deregulation?
- Apr 21, 2022 11:40 am GMT
Traditional energy markets and the deregulation that made them possible are failing society.
They are largely out of step with what society needs.
The central tenet of energy markets was to keep costs for power down. Largely it worked.
The designers of the markets did not foresee the impact of renewables, the need for storage, the importance of demand side management or the growing issues with security of supply.
In some markets the price signal is insufficient to trigger needed infrastructure, like storage and demand side management programs.
This is only going to get worse as the percentage of renewables increase. The worse it gets the less secure out supply is.
Markets need to evolve including:
1) Making room in the value chain for storage and demand side management. Remember market signals were going to cause transmission and generation construction WITHOUT incentives.
2) Capacity auctions should be by month.
3) Non-firm resources should not be allowed in a capacity auction.
4) Netting any resource (load or supply) over more than one market interval should not be allowed.
5) Imbalance market activities should be stepped up.
6) Demand side management programs should (a) participate in capacity auctions, (b) have both payments and penalties for performance and (c) be subject to a capacity true up on a quarterly basis.
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