Experts debate US capacity market reform, need for new ancillary service product RSS Feed

Experts debate US capacity market reform, need for new ancillary service product

As US wholesale power markets absorb more renewable energy resources, market design experts expect capacity prices to decline and there is debate within the industry about whether there should be an ancillary service product to incent flexibility.

The minimum offer price rule, or MOPR, was adjusted by federal regulators in recent years to prevent power price suppression in capacity markets from the growing volume of renewable energy resources receiving state-level subsidies. However, states that are encouraging renewable energy to combat climate change and renewable energy advocates have pushed back against the MOPR, which in current form, will prevent subsidized resources like offshore wind power from clearing in upcoming capacity auctions.

Bowring agreed with other panelists that the Effective Load Carrying Capability of renewable energy resources needs to be accurately calculated but doing so is complicated. PJM is currently working to fix its ELCC proposal after its initial plan was rejected by the Federal Energy Regulatory Commission. ELCC is a way of valuing the capacity contribution of intermittent renewable energy sources that have lower capacity factors than traditional baseload power generation resources.

“The marginal value of renewables decreases as you add them … and with more and more renewables on the system their contribution to capacity is going to go down in terms of megawatts and the price of capacity is going to go down … and it’s essential the ELCC accounts for that,” he said.

Increased renewable energy capacity will also bring zero marginal cost power, meaning the cost and price of power will also tend to go down for many hours, Bowring said.

And resource flexibility, like the ability to quickly ramp up and down, does not require new products, he said, adding that more closely following existing market rules would help increase flexibility.

Recently, nearly a majority of states in the eastern regional transmission organization region have declared 100% clean energy goals or requirements which means the states will be responsible for 100% of the megawatt hours of energy sold and supplied to customers being matched to a source of clean energy, Travis Kavulla, vice president of regulatory affairs at NRG Energy, said.

Read full article at S&P Global