IEEE Power & Energy Magazine - July/August 2018 - 86

Given the challenges posed by rapid electrification
and renewable build, markets will need to keep pace
on several different fronts simultaneously.

electricity system to go through several decades of unprecedented change. Widespread electrification will lead to load
growth not seen in decades. planning in a system dominated
by variable generation is more complex because it introduces a temporal component into every planning problem.
the timing and complementarity of the many different but
necessary electricity investment decisions are critical, and
many 20th century planning paradigms and tools are likely
insufficient to address the challenges ahead.
compounding the planning challenges, deregulation has
decentralized planning by putting many planning activities in
the hands of market participants. in current competitive markets, no stakeholder has visibility into all parts of the system,
which will seriously hamper execution of an overall long-term
vision. if uncertainty about policy, market rules, or timing of
complementary resource deployment calls future revenue
streams into question, then carbon targets may not be met, the
cost of financing may increase, and sub-optimal development
strategies pursued.
Electrification exacerbates planning challenges by involving sectors that historically have no strong links to electricity, most notably transportation. as mentioned earlier,
transportation loads represent significant energy but, perhaps even more importantly, may have very high and unpredictable instantaneous power demand. the new spatial
planning challenge, of developing transportation charging infrastructure in which the highest demand is located
where the electricity grid is best able to accommodate it,
is considerable.

Concepts for Future Market Design
Given the challenges posed by rapid electrification and
renewable build, markets will need to keep pace on several different fronts simultaneously. it can be argued that
a vertically integrated, rather than deregulated, structure
is best suited for coordinating the scope of electricity
system changes brought about by deep decarbonization. But this argument neglects functions that markets
are better suited to accomplish, namely communicating
information between participants and driving efficiency
improvements. the challenge is thus how to get the best
of both: 1) the flow of information and efficient operations from markets and 2) effective long-term planning
from a central decision maker. Below are some concepts,
challenges, and principles that such an optimal approach
should consider.
86

ieee power & energy magazine

Energy Market Compensates Balancing
Services, with Full Symmetry Between
Supply- and Demand-Side Balancing
in a world with near-zero marginal cost for energy and uncontrollable supply, energy markets primarily become a place to
compensate and schedule balancing services. as seen in figure 7, these balancing services can take many forms, including
flexible end uses, new nonfirm loads, energy storage, thermal
resources, and renewable curtailment. such resource types
would provide the bulk of balancing in a highly electrified,
high-variable generation system, but today these resources are
not integrated into markets in a way that would allow them to
operate in the way pictured.
in such a system, large loads would bid a demand curve
in which different amounts of energy consumption would be
offered at different prices, in a way that is completely analogous to how generators bid an energy supply curve today.
for small customers, this could be done by an aggregator on
their behalf that then sends control signals to building loads
after considering a customer's expressed preferences.
one technical challenge when scheduling flexible load
or energy storage is state-of-charge constraints, which are
not yet integrated into markets. today, most resources
that track state of charge, such as hydro or energy storage, self-schedule generation, which works fine when those
resource are marginal, when net-load is predictable and
well understood by the scheduler, or when few competing
balancing resources exist (there is no real need to exchange
information). as supply becomes less flexible and the
opportunity cost of not using newly electrified flexible
load increases, markets will play a critical role as a clearinghouse for balancing resources. it will be important for
regional transmission operators (rtos) to gain experience
scheduling flexible loads at a small scale before balancing
needs grow massive. the alternative is more reliance on
conventional resources, which in the context of deep decarbonization could add significantly to cost or make carbon
goals unattainable.

Capacity Market Must Have Multiple Products
That Represent Capacity of Different Time
Durations ("21st Century Screening Curve")
capacity markets serve two key functions in electricity today.
the first is as a longer-term planning mechanism to ensure
that sufficient resources are built and maintained to meet
expected loads, months or years in advance. the second is
july/august 2018



Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - July/August 2018

Contents
IEEE Power & Energy Magazine - July/August 2018 - Cover1
IEEE Power & Energy Magazine - July/August 2018 - Cover2
IEEE Power & Energy Magazine - July/August 2018 - Contents
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IEEE Power & Energy Magazine - July/August 2018 - Cover3
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