Economics: Electric Market Design
In restructured energy markets, RTOs and ISOs operate the transmission system to ensure open access to the electric grid and also operate wholesale power markets through which generators, load serving entities (LSEs) and other market participants buy and sell power. Among generators that sell into the markets operated by RTOs and ISOs, different generators are more efficient at performing certain functions. Some generators, like nuclear power plants, may take a long time to turn on and off but provide steady and predictable electricity. Others, like solar energy, provide low-cost energy but can only provide electricity when the sun is shining. The goal of any electricity system is to provide reliable, safe, resilient, and affordable electricity.
The most straightforward type of RTO or ISO market is the energy market, where the RTO or ISO predicts how much power will be necessary, and LSEs provide a “bid”, or cost estimate, to provide such power. The market accepts the lowest bids, stacking resources until enough electricity is secured to meet the estimated need. In this way, the least-cost option to provide the estimated electricity need is secured. Most power is secured in the day-ahead market, but there are additional auctions to accommodate real-time power fluctuations.
Power Systems Engineering: Resilience
Simply having enough electricity at the cheapest price in the short-term is not the only consideration for an RTO or ISO. Electricity providers want to ensure the electric system is both reliable and resilient in both the long-term and during crisis events. While grid reliability is a well-defined concept – referring to a system’s ability to meet consumer demand for electricity, even during disturbances – the exact meaning of resilience is less clear. In general, however, the term signifies an electric system’s ability to recover after some sort of shock, such as an extreme weather event or even attack.
Studies by the Department of Energy (DOE) and the National Energy Research Corporation (NERC) found that the US electricity system is currently not facing an imminent resilience crisis. However, both note that the shifting fuel mix from coal towards natural gas could cause resilience issues in the long-term, and that regulators should continue to support policy that prioritizes resilience.
Experts typically view resilience as a big-picture issue that requires region-specific expertise. For example, in the wake of the Polar Vortex, PJM (Midwest and Mid-Atlantic US RTO) prioritized better managing natural gas resources to ensure availability in the future. Improving resilience and reliability can involve a suite of options including better managing natural gas supplies to prevent shortages, hardening delivery infrastructure such as transmission lines and substations, integrating diverse fuel sources such as renewables and distributed generation, and storing fuel on-site.