28Designing Electricity Markets for a High Penetration of Variable Renewables
Jenny Riesz1 and Michael Milligan2
1 Centre for Energy and Environmental Markets and School of Electrical Engineering and Telecommunications, University of New South Wales, Sydney, Australia
2 National Renewable Energy Laboratory, Transmission and Grid Integration, Denver, CO, USA
Renewable technologies are often characterized as being somewhat different to “conventional” generating technologies in three ways, each with different implications for electricity markets. Firstly, some have highly variable and somewhat uncertain availability, meaning that electricity markets must be designed to elicit adequate flexibility. Second, many have very low short‐run marginal costs (SRMCs) (operating costs), meaning that the mechanisms for managing resource adequacy must be carefully considered. Third, some are nonsynchronous, meaning that grid codes and regulatory requirements must be appropriately designed. Access to flexibility can be enhanced by a range of market design choices, such as short dispatch intervals, short delays from gate closure to dispatch, large balancing areas, high demand‐side participation (DSP), and exposing renewable technologies to market price signals commensurate with other technologies. The design of markets for frequency control ancillary services (FCAS) also provides opportunities to increase access to flexibility, by creating active real‐time markets for a wide range of FCAS, allowing ...