The paper focuses on how electricity market designs must evolve in the context of power sector decarbonization. It covers the impact of increasing renewable energy sources like wind and solar on key market segments, including day-ahead, real-time capacity, and ancillary service markets. The paper highlights the challenges posed by the variability and uncertainty of renewable sources, necessitating enhanced system flexibility. It discusses the need for markets to align incentives and value resources that can accommodate renewable integration, addressing issues like overgeneration, ramping needs, forecast errors, and transmission constraints. The paper suggests that despite the appeal of marginal cost-based dispatch in a high-renewable context, most systems maintain existing market designs while reforming operations and rules to enhance flexibility.
This paper examines the profound shifts in energy markets driven by decarbonization. We analyze how the increasing integration of renewable energy sources like wind and solar is transforming the structure and operation of electricity markets. The study delves into the complexities of balancing the variability and unpredictability of renewables, emphasizing the need for enhanced system flexibility. It further discusses how market designs and operational strategies must evolve to accommodate these changes, highlighting the challenges of overgeneration, ramping needs, and transmission constraints. Our findings suggest that while existing market frameworks persist, significant reforms are essential to ensure efficient and reliable operation in a rapidly decarbonizing energy landscape.
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