On Market Designs for a Future with a High Penetration of Variable Renewable Generation

Restructured wholesale electricity markets serve stakeholders by providing three principal services: economically efficient real-time dispatch, incentives for resource adequacy and long-term cost recovery. Because at least two of these functions happened dynamically through market forces, future scenarios for clean, affordable and reliable power with a high fraction of variable resources challenge today’s market design. This paper presents two possible paths for future designs to continue serving these three functions and principles for policy-makers working on future market design. This working draft inspired the Long-Term Markets, Working with Short-Term Energy Markets brief, which is a part of the Wholesale Electricity Market Design for Rapid Decarbonization series.