WHOLESALE ELECTRICITY MARKET DESIGN FOR RAPID DECARBONIZATION: VISIONS FOR THE FUTURE

This report by Energy Innovation examines the need to modernize wholesale electricity market designs to accommodate the transition from large, fuel-burning power plants to decarbonized resources like wind, solar, and energy storage. It identifies the limitations of the current 'marginal cost dispatch' paradigm and proposes ten principles for future markets, while outlining two primary pathways for evolution: a 'Robust Spot Market' approach and a 'Long-Term Plus Short-Term Markets' approach.

• Current wholesale electricity markets were designed for a system of large central plant stations with inflexible demand, where prices and revenues are tied to production costs based on fuel prices.
• New carbon-free resources, such as wind, solar, and energy storage, differ from traditional thermal resources in three key ways: they have near-zero production costs, they are smaller and can be deployed more rapidly, and their output is tied to the availability of the energy resource (e.g., sunshine or wind).
• A disconnect between the Federal Energy Regulatory Commission (FERC), which governs wholesale rates, and state regulators, who govern retail rates, has historically hindered the ability of demand-side resources to participate in wholesale markets.
• The report proposes ten principles for modern wholesale electricity markets to ensure technology neutrality and least-cost power system goals, including the need to accommodate rapid decarbonization, support grid reliability, facilitate demand-side participation, and minimize market power.
• Two emerging pathways for future market design are identified: the "Robust Spot Market" pathway, which focuses on extending energy and services markets and decentralized bilateral contracting, and the "Long-Term Plus Short-Term Markets" pathway, which adds a centralized forward market to support needed resources.
• Both proposed pathways agree that current U.S. capacity markets, which trade capacity without sufficient regard for operational characteristics, should be fundamentally transformed or eliminated.

APA

AGGARWAL, S., & ORVIS, R. (2019). WHOLESALE ELECTRICITY MARKET DESIGN FOR RAPID DECARBONIZATION: VISIONS FOR THE FUTURE. Energy Innovation. https://energyinnovation.org/wp-content/uploads/Wholesale-Electricity-Market-Design-For-Rapid-Decarbonization-Visions-For-The-Future_updated.pdf

Chicago

AGGARWAL, SONIA, and ROBBIE ORVIS. WHOLESALE ELECTRICITY MARKET DESIGN FOR RAPID DECARBONIZATION: VISIONS FOR THE FUTURE. Energy Innovation, 2019. https://energyinnovation.org/wp-content/uploads/Wholesale-Electricity-Market-Design-For-Rapid-Decarbonization-Visions-For-The-Future_updated.pdf.

Wikipedia

{{cite report |last1=AGGARWAL |first1=SONIA |last2=ORVIS |first2=ROBBIE |title=WHOLESALE ELECTRICITY MARKET DESIGN FOR RAPID DECARBONIZATION: VISIONS FOR THE FUTURE |publisher=Energy Innovation |date=June 2019 |url=https://energyinnovation.org/wp-content/uploads/Wholesale-Electricity-Market-Design-For-Rapid-Decarbonization-Visions-For-The-Future_updated.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{aggarwal2019wholesale, author = {AGGARWAL, SONIA and ORVIS, ROBBIE}, title = {{WHOLESALE ELECTRICITY MARKET DESIGN FOR RAPID DECARBONIZATION: VISIONS FOR THE FUTURE}}, institution = {Energy Innovation}, year = {2019}, month = jun, url = {https://energyinnovation.org/wp-content/uploads/Wholesale-Electricity-Market-Design-For-Rapid-Decarbonization-Visions-For-The-Future_updated.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }