The Biden administration has pledged to reduce US greenhouse gas emissions to half of 2005 levels by 2030. A large share of these reductions would have to come from the power sector, with high-emitting coal-fired power plants being obvious targets for closure. Program on Energy and Sustainable Development (PESD) Associate Director Mark Thurber spoke on NPR's Here & Now about why phasing out coal-fired generation in the US by 2030 is an achievable goal -- and how we need to take care of affected workers along the way. Listen to the interview.
Stanford's Program on Energy and Sustainable Development (PESD) is collaborating with the California Public Utilities Commissions (CPUC) on an Impact Lab that tackles an urgent policy question: How do we make sure the lights stay on as the electricity mix climbs towards state targets of 50% renewable energy in 2026 and 60% in 2030? Wind and solar are essential zero-carbon energy sources, but they are only available when the wind blows and the sun shines. Blackouts in Northern California last August were a warning that system reliability is at risk if the state doesn't act quickly to implement policies that ensure backup generation is available when needed.
The existing regulatory instrument for ensuring long-term resource adequacy, capacity payments, is not well-adapted to a high-renewables future. Capacity payments aim to ensure enough "firm capacity" is always available to keep the lights on, but the firm capacity construct is not applicable to wind and solar, which cannot be turned on and increased at the system operator’s discretion.
The PESD/CPUC Impact Lab has proposed an alternative resource adequacy mechanism that is robust to a world of high and solar generation: auctions of Standardized Fixed-Price Forward Contracts (SFPFCs) that ensure every megawatt-hour of energy consumed in the state is hedged through long-term financial contracts. Unlike capacity payments, the SFPFCs provide a strong financial incentive for generators to meet their commitments to supply reliable energy wherever and whenever it is needed. PESD research suggests this novel policy mechanism can provide enhanced reliability and major cost savings relative to the capacity payment approach.
The CPUC has initiated a stakeholder process to consider possible implementation of this proposal, and PESD is assisting with research, policy outreach, and development of market simulation games that will allow stakeholders to gain hands-on experience with how the SFPFC mechanism would work in a realistic electricity market.
This study quantifies the economic and environmental impacts associated with the change from a zonal to nodal design in the Texas electricity market. To begin, we present a framework to understand the mechanisms that lead to inefficient outcomes under a zonal market model. Then, we estimate a semiparametric partially linear conditional mean function to quantify changes in selected market metrics for the same set of underlying system conditions after versus before the implementation of the nodal market design. We estimate that daily variable costs of thermal generation given the same level of daily output fell by 3.9% with the implementation of the nodal market design. In contrast, we find that total heat input and CO2 emissions increased with the market design change. We show how changes in operation of coal and natural gas technologies contributed to these outcomes, and find that a large proportion of the daily variable cost savings was due to the synergies achieved through increased efficiency of operation of these two technologies.
Electricity retailing is at a crossroads. Technological change is eroding revenues from the traditional electricity retailing business model. However, many of these new technologies have the potential to create new products and revenue streams for electricity retailers. We assess the future of electricity retailing under two possible approaches by policymakers and regulators to addressing these challenges and new opportunities: a reactive approach and a forward-looking approach.
Recent record-breaking heat waves followed by rolling blackouts in California have sparked renewed discussion about the state’s options to address future power outages. Program on Energy and Sustainable Development Director Frank Wolak spoke to Bloomberg about power market reforms as one option where California could open up its electricity to retail competition. While pricing would better reflect grid supply and demand, it’s unlikely this option would have backing given today’s political climate. Read more (may require subscription)
Today, the Sacramento Bee and San Jose Mercury News both quoted Program on Energy and Sustainable Development Director Frank Wolak in their stories about California’s recent blackouts. In the Sacramento Bee’s article about the California Independent System Operator declaring a temporary ban on “convergency bidding,” Wolak came out in support of the system comprised of power generators and traders saying that it sends the proper price signals to drive supply. The San Jose Mercury News article said that California electricity shortages will be more common during major heat waves due to the state’s shift away from fossil fuels providing more consistent power to cleaner but more intermittent sources such as solar and wind energy. “We have a much more risky supply of energy now because the sun doesn’t always shine when we want and the wind doesn’t always blow when we want,” said Wolak. “We need more tools to manage that risk. We need more insurance against the supply shortfalls.”
The basic features of an efficient short-term wholesale market design do not need to change to accommodate a significantly larger share of zero marginal cost intermittent renewable energy from wind and solar resources. A large share of controllable zero marginal cost generation does not create any additional market design challenge relative to a market with a large share of controllable positive marginal cost generation. In both instances, generation unit owners must recover their fixed costs from sales of energy, ancillary services, and long-term resource adequacy products.
