Electric Boogie: Integrating reliability-must-run practices into wholesale electricity markets
“The first thing to get straight is that the effect of RMR agreements is often to bias investment toward the cost-of-service regulated transmission grid and away from the market-driven generator and competitive retail sectors,” noted Giberson. “The result is a less innovative and less dynamic power system than would otherwise emerge over time. But we can change this.”
As Giberson explains, experience with RMR services has yielded a few principles for where they can support, rather than undermine markets:
- When reliability principles dictate out-of-market actions by ISOs, energy and reserve prices should reflect resource scarcity;
- Rules governing RMR service should provide for transparency in operation and with respect to cost of service;
- ISOs should enter into RMR agreements only when the benefits of meeting reliability standards through the agreement exceed the costs; and
- ISOs should consider cost-effective alternatives to RMR agreements when they would adequately address the potential reliability needs.
Giberson adds that the time is right to consolidate and implement these best practices, before the next potential wave of retirements.
“Market conditions are never static, so as generation resources continue to enter and exit the market, the transmission system will continue to need to adapt,” notes Giberson. “In view of this, poorly designed RMR policies could adversely shape generation investment and dispatch for years into the future unless we do something now.”
