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Enhancing Intraday Price Signals in U.S. ISO Markets for a Better Integration of Variable Energy Resources

Ignacio Herrero, Pablo Rodilla, and Carlos Batlle

Year: 2018
Volume: Volume 39
Number: Number 3
DOI: 10.5547/01956574.39.3.iher
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Abstract:
Efficient operation of power systems increasingly requires accurate forecasting of load and variable energy resources (VER) production, along with flexible resources and markets, capable of adapting to changing conditions in the intraday horizon. It is of utmost importance to reflect these needs in price signals, to align the incentives of market agents with the new challenges. The two-settlement system used by U.S. ISOs falls short to provide efficient intraday economic signals and a cost reflective allocation of intraday rescheduling costs. This paper advocates for a multi-settlement system, which entails calculating intraday prices as forecasts are updated and re-schedules are executed. This approach incorporates more granular prices, as in European intraday markets, while keeping the efficient centralized dispatch logic of the ISO model. A stylized case example illustrates the virtues of a multi-settlement system, which sends cost reflective signals, and consequently facilitates VER integration.



Restructuring Revisited Part 1: Competition in Electricity Distribution Systems

Scott P. Burger, Jesse D. Jenkins, Carlos Batlle, and Ignacio J. Pérez-Arriaga

Year: 2019
Volume: Volume 40
Number: Number 3
DOI: 10.5547/01956574.40.3.sbur
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Abstract:
This paper addresses the implications of the emergence of distributed energy resources (DERs) for competition in the electricity distribution systems. The regulations on industry structures in place today were designed in an era characterized by centralized resources and relatively price inelastic demand. In light of the decentralization of the power sector, regulators and policy makers must carefully reconsider how industry structure at the distribution level affects competition, market development, and cost efficiency. We analyze the economic characteristics of distribution network owners and operators, DER owners, and aggregators and retailers. We translate the foundational theories in industrial organization and the lessons learned during the previous wave of power system restructuring to the modern context to provide insight into three questions. First, should distribution system operations be separated from distribution network ownership in order to ensure the neutrality of the DSO role? Second, should DNOs be allowed to own and operate DERs, or should DER ownership be left exclusively to competitive actors? Third, does the emergence of DERs necessitate a reconsideration of the role of competition in the provision of aggregation services such as retailing? This paper is the first part of a two-part series on competition and coordination in rapidly evolving electricity distribution systems.



Restructuring Revisited Part 2: Coordination in Electricity Distribution Systems

Scott P. Burger, Jesse D. Jenkins, Carlos Batlle, and Ignacio J. Perez-Arriaga

Year: 2019
Volume: Volume 40
Number: Number 3
DOI: 10.5547/01956574.40.3.jjen
View Abstract

Abstract:
This paper addresses the mechanisms needed to coordinate vertically and horizontally disaggregated actors in electricity distribution systems. The mechanisms designed to coordinate planning, investments, and operations in the electric power sector were designed with minimal participation from either the demand side of the market or distributed energy resources (DERs) connected at distribution voltages. The emergence of DERs is now animating consumers and massively expanding the number of potential investors and participants in the provision of electricity services. We highlight how price signals - the primary mechanism for coordinating investments and operations at the transmission level - do not adequately coordinate investments in and operations of DERs with network infrastructure. We discuss the role of the distribution system operator in creating cost-reflective prices, and argue that the price signals governing transactions at the distribution level must increasingly internalize the cost of network externalities, revealing the marginal cost or benefit of an actor's decisions. Price signals considered include contractual relationships, organized procurement processes, market signals, and regulated retail tariffs. This paper is the second part of a two-part series on competition and coordination in rapidly evolving electricity distribution systems.





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