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

This research paper proposes the creation of Organized Long-Term Markets (OLTMs) to support the rapid deployment of clean energy resources in restructured wholesale electricity markets. The author argues that current market designs—including energy-only, capacity, and hybrid models—fail to provide the long-term investment signals and liquidity needed for grids with high penetration of variable renewable energy (VRE). The proposed OLTM acts as a derivative market that standardizes long-term energy delivery contracts, allowing producers to recover capital expenditures and consumers to hedge against price volatility while remaining linked to real-time spot market pricing.

• The author proposes an "energy markets cascade" based on three core principles: it should trade only in delivered megawatt-hours of electricity (making all but the real-time market derivative markets), participation in longer-duration markets must be voluntary to ensure price discovery, and markets must be non-discriminatory, transparent, and liquid.
• Current U.S. electricity market designs are criticized for failing these principles. Mandatory capacity markets (such as PJM, NYISO, and ISO-NE) are noted for not using energy as a derivative product and for being compulsory. Hybrid markets (such as MISO, SPP, and CAISO) are described as having truncated energy cascades where long-term procurement is heavily regulated or dominated by vertically integrated utilities.
• The Organized Long-Term Market (OLTM) is conceptualized as a voluntary derivative market that standardizes long-term energy delivery over multiple years or decades. It aims to recruit and optimize clean energy portfolios, providing a mechanism for capital-intensive resources to amortize investments and for buyers to avoid spot market volatility.
• OLTM participants are categorized into producers (such as utility-scale VREs), consumers (such as load-serving entities or resellers), and facilitators. Facilitators, which include energy storage and flexible demand, help balance supply and demand and hedge physical delivery risks.
• In the context of ERCOT, the author suggests an OLTM could improve reliability and stability by replacing opaque bilateral arrangements and PPAs with a transparent, liquid market. This would reduce the need for centrally mandated capacity requirements and help coordinate long-term resource investment.
• For CAISO and Community Choice Aggregators (CCAs), an OLTM could facilitate the coordination of long-term procurement and manage the risks associated with customers migrating from investor-owned utilities to CCAs. It could also allow CCAs to acquire local resources through a system of shadow prices for local content requirements.
• The author compares the OLTM to the Forward Clean Energy Market (FCEM) proposed for ISO-NE. While the FCEM focuses on unbundling and trading Clean Energy Attribute Credits (CEACs) to resolve capacity market conflicts, the OLTM focuses on the market for long-term energy sales and aims to make capacity markets unnecessary.

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} }