Brattle report recommends Changes to British and Spanish Power Market Design to Meet Resource Adequacy and Low Carbon Objectives
Great Britain (GB) and Spanish electricity markets both require reforms, even though the UK is short of capacity and Spain has an excess.
The common denominator is that they both need to design electricity sector models that will help them to meet their capacity needs and their carbon reduction targets at minimum cost.
The proposed solution is that both countries introduce resource adequacy markets to ensure that sufficient flexible capacity is available to cope with the growing share of intermittent renewables.
This report by The Brattle Group - prior to the adoption in GB of its electricity market reform - recommends reforms to the British and Spanish power markets that would help to achieve both resource adequacy and government-mandated carbon reduction objectives. The analysis draws on international experience to evaluate how different wholesale market models deal with the dual objectives, and concludes that all market models face a growing challenge to ensure resource adequacy in the presence of low carbon policy objectives.
The authors illustrate their findings by referring to the challenges facing Spain and Great Britain (GB). While Spain is suffering from an excess of capacity, GB may be facing a capacity shortage. However, both markets need to continue building renewables in order to meet their EU targets. The authors recommend that both Spain and GB introduce resource adequacy markets to ensure that sufficient operating reserves (including demand response) are available to cope with an increasing share of intermittent generation – an important issue that was identified in their analyses of low carbon objectives under all market models. Since the report was written, Britain has adopted some of the proposals, including a resource adequacy market.
The paper, "Resource Adequacy and Renewable Energy in Competitive Wholesale Electricity Markets," was written by Brattle principals Serena Hesmondhalgh, Johannes Pfeifenberger and David Robinson.