Wholesale electricity market design
Frank A. Wolak
Abstract
This paper identifies the key features of successful wholesale electricity market designs. These include: (1) the match between the short-term market used to dispatch generation units and the physical operation oftheelectricity network, (2) effective regulatory and market mechanisms to ensure long-term generation resource adequacy, (3) appropriate mechanisms to mitigate local market power, and (4) mechanisms to allow the active involvement of final demand in the short-term market. This is followed by a discussion of how these lessons can be applied to developing countries and small markets so that these regions can benefit from wholesale electricity competition at lower cost and with less administrative burden than larger markets.Market design enhancements that support thecost-effectiveintegration of both grid-scale and distributed renewablesarebriefly discussed.The paper closes with proposed directions for future researchin the area ofelectricity market design.