IEEE Power & Energy Magazine - November/December 2017 - 82

If the market design features an inadequate scarcity pricing
mechanism not properly reflecting the value of lost load,
the result can be lower realized prices.
Mexico also introduced day-ahead energy, real-time energy,
and capacity markets, with a divestment of the country's generation assets. In China, a number of provinces have introduced pilots for electricity markets. These areas have pointed
to the growth of renewables and clean energy targets as one
of the primary drivers for these large-scale changes to their
electricity markets.

markets even function when zero-variable-cost renewable
resources are supplying a majority of the energy? What are
the new technologies we need to prepare for, and will they
be able to fully participate in the current market design? The
future is uncertain, but industry leaders will continue their
focus on system reliability while adapting to the constantly
changing resource mix.

Market Designs:
What Does the Future Hold?

For Further Reading

Throughout the restructured regions, ongoing initiatives and
regulatory proceedings are likely to cause further evolution
to the electricity markets. FERC has initiated several proposed rulings on energy storage and DER participation in
markets, price-setting changes, and allocation of uplift costs,
to name a few. European markets are grappling with what
the appropriate locational granularity for prices should be.
Initiatives in New York State and California, as well as by
FERC, show a potential for much greater participation from
small distributed resources and how they can participate in
the wholesale markets. Finally, areas around the world are
all trying to determine whether external subsidies and outof-market investments for different types of technologies can
be integrated in market design.
Complex electricity markets require a deep understanding of both the physics and the economics. While prioritization and the stakeholder process should (and will) continue
to determine when changes to the market occur, more work
could be done to anticipate those changes. The Electric Power
Research Institute and the North American ISOs initiated a
collaborative research and development (R&D) group to look
at future R&D needs regarding technical electricity market
design. The objective is to discuss the current state of technical
design across the regions, assess best practices while realizing
that different designs are necessary, and develop coordinated
R&D priorities for time frames that are more than a few years
out. Primary R&D challenges include
✔ incentiving compatible price formation
✔ promoting flexibility and reliability services
✔ creating advanced market clearing software that captures
technical capabilities and limitations of technologies
✔ finding ways to extend or interface the market with
the distribution system.
Market designers, stakeholders, regulators, and researchers will continue to work together to understand the changing needs of the power system. Who knows what the challenges will be ten years from now? Can current electricity
82

ieee power & energy magazine

(2016, Nov.). Wholesale electricity market design initiatives
in the United States: Survey and research needs. EPRI. Palo
Alto, CA. Product 3002009273. [Online]. Available: https://
www.epri.com/#/pages/product/000000003002009273/
M. Ahlstrom, E. Ela, J. Riesz, J. O'Sullivan, B. Hobbs,
M. Milligan, P. Sotkiewicz, and J. Caldwell, "The evolution
of the market," IEEE Power Energy Mag., vol. 13, no. 6, pp.
6066, Nov./Dec. 2015.
FERC energy price formation initiative. [Online]. Available: https://www.ferc.gov/industries/electric/indus-act/rto/
energy-price-formation.asp
European Clean Energy Package. Associated materials.
[Online]. Available: https://ec.europa.eu/energy/en/news/
commission-proposes-new-rules-consumer-centred-cleanenergy-transition
California ISO. (2017, May). Western EIM benefits report: First quarter 2017. [Online]. Available: https://www
.caiso.com/Documents/ISO-EIMBenefitsReportQ1_2017.
pdf
E. Ela, M. Milligan, A. Bloom, A. Botterud, A. Townsend,
and T. Levin, "Evolution of wholesale electricity market design with increasing levels of renewable generation," NREL,
Golden, CO, Tech. Rep. NREL/TP-5D00-61765, Sept. 2014.

Biographies
Erik Ela is with the Electric Power Research Institute, Palo
Alto, California.
Congcong Wang is with the Midcontinent ISO, Carmel,
Indiana.
Sai Moorty is with the Electric Reliability Council of
Texas, Austin.
Kenneth Ragsdale is with the Electric Reliability Council of Texas, Austin.
Jon O'Sullivan is with EirGrid, Dublin, Ireland.
Mark Rothleder is with the California ISO, Folsom.
Ben Hobbs is with Johns Hopkins University, Baltimore,
Maryland.
p&e

november/december 2017

http://https:// http://www.epri.com/#/pages/product/000000003002009273/ https://www.ferc.gov/industries/electric/indus-act/rto/ https://ec.europa.eu/energy/en/news/ https://www http://www.caiso.com/Documents/ISO-EIMBenefitsReportQ1_2017

Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - November/December 2017