EME 801
Energy Markets, Policy, and Regulation

Summary and Final Tasks

PrintPrint

Summary

Variable Energy Resources (VERs) - specifically wind and solar - do introduce some special economic challenges to power grids and electricity markets. Since VERs have such low marginal costs (remember that fuel from the wind and sun is free) they do have the potential to depress prices in the day-ahead and real-time energy markets, even producing negative prices in some cases. This creates challenges for system operators in restructured areas in particular, since they are charged with having enough generation capacity on the grid to meet reliability requirements, but individual generation owners will stay in the market based only on business criteria - whether they earn enough money to make continued operations worthwhile. The resulting conflict between market and regulatory signals has been called the "missing money" problem, and capacity payments have been introduced, albeit controversially, as a mechanism to make up for the "missing money." Energy output from VERs can also fluctuate faster than system operators are able to adjust for, so large-scale VER integration will almost certainly increase the demand for existing ancillary services (particularly frequency regulation) and may necessitate new types of ancillary services, which could be provided by either demand-side or supply-side resources.

Reminder - Complete all of the Lesson 7 tasks!

You have reached the end of Lesson 7! Double check the What is Due for Lesson 7? list on the first page of this lesson to make sure you have completed all of the activities listed there before you begin Lesson 8. Note: The Lesson 8 material will open Monday after we finish Lesson 7.

Tell us about it!

If you have anything you'd like to comment on, or add to, the lesson materials, feel free to post your thoughts below.

Don't see the "Comment" area below? You need to be logged in to this site first! Do so by using the LOGIN link in the menu bar. Once you have logged in, you may need to refresh the page in order to see the comment area below.