2020 PES GM 8/5 Panel Video: Market Design Evolution to accommodate 100% Zero-variable-cost Resources

Many in the industry have been commenting on whether and how electricity markets, in their current form, will function to provide the price signals and reliability on an electric power system where nearly all of the power is supplied by zero-fuel-cost (renewable) resources. Marginal costs when these resources are price-setters may be set at zero or close to zero, challenging the ability to recover the large capital and investment costs that are incurred to build the plants and maintain those plants. Some believe substantial changes are required to ensure that the planned technology mix can supply and deliver energy reliably and cost-effectively. Others believe, that while energy prices may look different from existing outcomes, the marginal cost pricing design can continue to work, with energy storage, price responsive demand, and reliability pricing (shortages and near shortages of reserve) setting prices higher during certain periods and providing the infra-marginal rent necessary. The panel will discuss the challenges, some current operating experience, and potential designs and anticipated outcomes from market design experts that have thought extensively on the topic.