The bad news is that state public policies often do undermine competitive electricity markets. The good news is that the harm can be mitigated. States have become increasingly active in pursuing environmental goals by subsidizing investment in renewable energy generation, including solar, wind, and hydroelectric resources. This subsidized entry of capacity is problematic to the...
Financial traders that do not own generation or serve load can buy or sell energy in most RTOs’ day-ahead markets. Concerns have been raised about financial traders because some believe that much of their activity can be characterized as market manipulation. Indeed, many of the sanctions imposed by FERC enforcement have been against financial traders. ...
Most electricity markets have requirements to maintain a minimum level of generating capacity to ensure that they can keep the lights on under nearly all conditions. Energy and operating reserve markets will typically not provide enough revenue to keep this quantity of generation in service, so capacity markets were developed to provide economic signals that...
Most spot electricity markets establish locational marginal prices (LMPs) that reflect the unique value of energy at each location or node on the network. Components of the LMP include the system marginal price, losses, and the cost of transmission congestion. When a transmission facility reaches its operating limit, higher-cost units must be dispatched instead of lower-cost...