IEEE Power & Energy Magazine - November/December 2015 - 66

regulatory view) to propose that these systems should be
subject to control and dispatch by the system operator in the
same way as utility-scale wind and solar power plants.
With today's ubiquitous communications, however, it
is technically possible to have visibility, control, and even
market participation of distributed PVs (along with demand
response devices and loads, such as electric car chargers,
water heaters, pool pumps, and local storage), and there are
good reasons to believe that this will be increasingly important for power systems. For example, both utility-scale and
distributed solar will see the same general solar pattern
across the day, but if utility-scale solar is dispatched and is
sometimes curtailed to minimize system operating costs,
then this level of curtailment will be exacerbated by additional distributed solar PV systems that are not comparably
treated. Similarly, stresses on system services, ramping, and
other system issues will be significantly increased if distributed solar is treated as negative load rather than integrated
into markets and operations.
With increased distributed technology and complexity, it will no longer be sufficient to assume that generation
is on the transmission system while passive loads are on
the distribution system. One approach for operating these
increasingly complex and capable distribution systems is
the concept of a distribution system operator (DSO), which
has been implemented in Ireland and is currently being discussed in the state of New York. A DSO is a nonprofit entity
that operates the distribution system, much like an ISO
operates the transmission system. Conceptually, this could
also lead to new markets both on the distribution side and
between ISO and DSO entities, leading to even more robust
market design options.

Conclusions
Electricity market designs are continuously undergoing
change in an effort to improve and respond to technology,
economic, and policy changes. Increasing amounts of variable renewables are a catalyst for additional market evolution,
but there are many other drivers. Europe is a good example
of this, where energy efficiency and the global recession has
reduced demand, the dramatic growth in shale gas in the
United States has reduced the price of coal in Europe, and
the Emissions Trading System has failed to deliver a significant price on CO2. The combination of such factors has
resulted in a well-documented "crisis" in the European electricity markets (see "For Further Reading").
Markets work best when there is a high degree of price
transparency and liquidity between buyers and sellers. Ideally, all entities should see and respond to market prices in a
logical way. In practice, there are situations where many of
the consumers and producers of electricity are not exposed
to market prices or do not have incentives to change their
behaviors based on changes in price. So electricity markets
are not perfect, but many cost and efficiency advantages are
still provided by the existing markets even when a subset
66

ieee power & energy magazine

of participants is responding to market price signals. With
increasing participation of resources and loads, markets will
provide even more value in the future.
However, these are complex challenges, and we are still
learning. Markets around the globe are working on these
issues, sometimes with very different approaches and market ideologies, and it is important to share experiences and
results. Elegant solutions are possible, and properly designed
market systems will have a critical role in the electricity grid
with very high levels of renewable generation.

For Further Reading
D. Auverlot, É. Beeker, G. Hossie, L. Oriol, and A. RigardCerison. (2014, Jan.). The crisis of the European electricity system-diagnosis and possible ways forward. Policy
Planning Commission of France. [Online]. Available: http://
www.strategie.gouv.fr
M. Miller, L. Bird, J. Cochran, M. Milligan, M. Bazilian,
E. Denny, J. Dillon, J. Bialek, M. O'Malley, and K. Neuhoff.
(2013, July). Next generation of RES-E policy instruments
(RES-E-NEXT). IEA implementing agreement for renewable energy technology deployment (IEA-RETD). [Online].
Available: http://iea-retd.org/archives/publications/res-enext
M. Ahlstrom, D. Barlett, C. Collier, J. Duchesne, D.
Edelson, A. Gesino, M. Keyser, D. Maggio, M. Milligan, C.
Mohrlen, J. O'Sullivan, J. Sharp, P. Storck, and M. Rodriguez, "Knowledge is power-Efficiently integrating wind
energy and wind forecasts," IEEE Power Energy Mag., vol.
11, no. 6, pp. 45-52, Nov./Dec. 2013.
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,
Tech. Rep. NREL/TP-5D00-61765, Sept. 2014.
J. Riesz and M. Milligan, "Designing Electricity Markets
for a High Penetration of Variable Renewables," WIREs Energy Environ., vol. 4, no. 3, pp. 279-289, 2015.

Biographies
Mark Ahlstrom is with WindLogics, Saint Paul, Minnesota.
Erik Ela is with the Electric Power Research Institute,
Boulder, Colorado.
Jenny Riesz is with the Centre for Energy and Environmental Markets, Sydney, Australia.
Jonathan O'Sullivan is with the EirGrid Group, Ireland.
Benjamin F. Hobbs is with Johns Hopkins University,
Baltimore, Maryland.
Mark O'Malley is with University College Dublin, Ireland.
Michael Milligan is with the National Renewable Energy Laboratory, Golden, Colorado.
Paul Sotkiewicz is with PJM Interconnection, LLC,
Audubon, Pennsylvania.
Jim Caldwell is with the Low Carbon Grid Study, Sonoma, California.
p&e

november/december 2015


http://http:// http://www.strategie.gouv.fr http://www.iea-retd.org/archives/

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