Concerns about climate change have spurred efforts to accelerate the development and introduction of low-carbon technologies (including wind, solar, nuclear, and carbon capture and storage) into electricity supply industries worldwide.  At the same time, formal wholesale markets for electricity have become the norm, having now been in place for more than ten years in many regions of the United States and for an even longer time in most industrialized countries of the world.  Integrating a substantial amount of low-carbon energy sources into wholesale electricity markets presents a number of new challenges and opportunities.

First, regulatory mechanisms must support the construction of an appropriate transmission infrastructure, including to interconnect renewable generation remote from population centers. Second, renewable energy sources such as wind and solar are intermittent (they only produce electricity when the renewable resource is available).  If combined with interval metering infrastructure and an appropriate retail pricing regime, active participation of final consumers in the wholesale market can help to manage the intermittent nature of renewable energy technologies.  Third, financing the construction of a substantial amount of low-carbon generation capacity-such as nuclear energy or coal-fired capacity with carbon capture and sequestration (CCS)-in a wholesale market environment may require the introduction of additional regulated revenue streams because of longer construction times, higher fixed costs, and liability costs associated with these technologies.  

Through a combination of quantitative modeling and case-studies of jurisdictions in the U.S. and around the world, PESD researchers will identify the most cost-effective policies for adapting wholesale electricity markets to support low-carbon energy and ensure the long-term viability of wholesale electricity markets.

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Frank Wolak