“Are Capacity Markets Necessary to Ensure Adequate Generating Reserves?” That was the title of the panel I moderated at the third annual Austin Electricity Conference (sponsored by The University of Texas McCombs School of Business, School of Law, and Cockrell School of Engineering on April 18 and 19.)
The conference theme — “Resource Adequacy in Competitive Electricity Markets” — is an issue of great importance here in Texas, where we have concerns about whether we will have enough generation capacity in coming summers.
Several electricity markets in the eastern United States include a “capacity market,” or central procurement of generation capacity for anticipated peak load, typically arranged three years into the future. Texas does not have a capacity market, relying instead on occasional high prices (and anticipation of high prices) in the wholesale market to encourage investment in generation. Various tweaks have been made to this basic principle of an “energy-only” market, and a current proposal by Professor William Hogan of Harvard University suggests a “demand curve for reserves.”
In my presentation, “Are Capacity Markets Necessary to Ensure Adequate Generating Reserves?” I lay out the fundamental issues and outline potential solutions.
Pictured (left to right): Ross Baldick, William Hogan, Michael Robinson of Midwest ISO, Dan Jones of Potomac Economics, and Paul Sotkiewicz of PJM.