LET’S GET ORGANIZED! LONG-TERM MARKET DESIGN FOR A HIGH PENETRATION GRID

The document argues that current US electricity market designs—including energy-only, capacity, and hybrid models—fail to support the rapid deployment of variable renewable energy (VRE) because they lack a functional 'energy markets cascade' that connects long-term investment to real-time pricing. To resolve this, the author proposes Organized Long-Term Markets (OLTMs), which would standardize long-term energy delivery contracts, increase liquidity and transparency, and allow for the optimization of diversified resource portfolios. The paper details the design of OLTMs, including the roles of producers, consumers, and facilitators, and applies the concept to the specific challenges faced by ERCOT, CAISO, and ISO New England.

• A healthy 'energy markets cascade' should follow three core principles: it must trade in only one underlying commodity (delivered megawatt-hours), participation in longer-duration derivative markets must be voluntary, and markets must be non-discriminatory, transparent, and liquid.
• Existing US market designs generally fail these principles: mandatory capacity markets (like PJM and ISO-NE) use non-derivative products and compulsory participation, while hybrid markets (like MISO, SPP, and CAISO) often truncate the energy cascade through heavy regulation or utility monopsony.
• The proposed Organized Long-Term Market (OLTM) is a voluntary derivative market that standardizes long-term energy delivery over multiple years or decades, allowing producers to amortize capital costs and consumers to hedge against price volatility.
• OLTMs utilize a portfolio optimizer to combine various resources—including VREs, storage, and flexible demand—into diversified energy sales, reducing the basis and shape risk compared to traditional bilateral Power Purchase Agreements (PPAs).
• In the ERCOT market, an OLTM could reduce the need for out-of-market payments and reliability-unit-commitment processes by improving transparency and allowing smaller players to access diversified long-term portfolios.
• For California (CAISO), an OLTM could help Community Choice Aggregators (CCAs) coordinate long-term procurement and provide a liquid market for long-term obligations, potentially reducing the need for contentious exit payments from investor-owned utilities.
• In ISO New England, an OLTM is presented as a more comprehensive alternative to the Forward Clean Energy Market (FCEM); while FCEM focuses on unbundled clean energy attributes, OLTM focuses on the market for long-term energy sales to eliminate the need for flawed capacity markets.

APA

GIMON, E. (2022). LET’S GET ORGANIZED! LONG-TERM MARKET DESIGN FOR A HIGH PENETRATION GRID. Energy Innovation. https://energyinnovation.org/wp-content/uploads/Lets-Get-Organized-Long-Term-Market-Design-for-a-High-Penetration-Grid.pdf

Chicago

GIMON, ERIC. LET’S GET ORGANIZED! LONG-TERM MARKET DESIGN FOR A HIGH PENETRATION GRID. Energy Innovation, 2022. https://energyinnovation.org/wp-content/uploads/Lets-Get-Organized-Long-Term-Market-Design-for-a-High-Penetration-Grid.pdf.

Wikipedia

{{cite report |last1=GIMON |first1=ERIC |title=LET’S GET ORGANIZED! LONG-TERM MARKET DESIGN FOR A HIGH PENETRATION GRID |publisher=Energy Innovation |date=September 2022 |url=https://energyinnovation.org/wp-content/uploads/Lets-Get-Organized-Long-Term-Market-Design-for-a-High-Penetration-Grid.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gimon2022lets, author = {GIMON, ERIC}, title = {{LET’S GET ORGANIZED! LONG-TERM MARKET DESIGN FOR A HIGH PENETRATION GRID}}, institution = {Energy Innovation}, year = {2022}, month = sep, url = {https://energyinnovation.org/wp-content/uploads/Lets-Get-Organized-Long-Term-Market-Design-for-a-High-Penetration-Grid.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }