Market Insights

What is Shortage Pricing and Why is it Essential in Competitive Electricity Markets?

In centrally-organized electricity spot markets, resources are scheduled and dispatched to meet anticipated demand plus a margin of operating reserves.  When energy demand is met and operating reserves are maintained, the system is secure.  At times, due either to unanticipated demand or resource outages, the system is in shortage and does not have resources available...

What is a Multi-Settlement Electricity Market?

A multi-settlement market is a centrally-organized electricity market where physical electricity products are bought and sold initially on a forward basis and then resettled in relation to actual production and consumption in the real-time operating horizon.   In the U.S. and in other parts of the world with advanced electricity markets, the forward market is organized...

Do State Public Policies Undermine Competitive Electricity Markets?

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...

Why Do Capacity Markets Exist?

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...