Capacity markets provide an opportunity for distributed energy resources (DERs) to participate and succeed in the market.
Regulatory initiatives like Order 22 22 and Quad Deuce aim to expand market access and redefine demand response constructs for DERs.
The debate between market-driven approaches and central planning in the energy industry continues as both have their own advantages and challenges.
The success and viability of renewable energy resources are heavily influenced by governance structures and the integration of transmission and distribution (T&D) values into market mechanisms.
Deep dives
Texas and the Potential of Capacity Markets
In Texas, capacity markets are seen as an opportunity for distributed energy resources (DERs) to participate in the market and get what they deserve. However, some argue that the existing programs that pay DERs more than wholesale market prices have contributed to their success. The design of capacity markets in Texas is similar to other regions, and the underlying principle of capacity payments remains the same. The incentive to build new power plants comes from high prices in the spot market during scarcity events, and the existing programs provide additional revenue for DERs. The debate over the effectiveness of capacity markets continues, but the geographic conditions play a significant role in the success of renewable energy resources.
The Role of Order 22 22 and Quad Deuce
Order 22 22 and Quad Deuce are regulatory initiatives that aim to create more opportunities for DERs in the market. While the specific details of these initiatives may vary, they generally focus on expanding market access for DERs and redefining demand response constructs. The goal is to provide more flexibility for DERs to participate in the energy and capacity markets, potentially allowing for greater engagement and value for these resources. It remains to be seen how these initiatives will influence the market, but they are seen as potential opportunities for DERs to further contribute to the grid.
Considering the Future Grid and Market Design
As the energy industry evolves and moves towards a future grid, different market design approaches are being considered. The choice between market-driven approaches and central planning is a complex question. Each option comes with its own advantages and challenges. While some argue for the benefits of market-driven approaches that allow for more flexibility and competition, others highlight the need for central planning to ensure reliable and efficient operation of the grid. Ultimately, finding the right balance between market dynamics and central oversight is crucial to facilitate the integration of renewable energy resources and build a sustainable future grid.
The Importance of Governance and T&D Values
Beyond market design considerations, the importance of governance and transmission and distribution (T&D) values cannot be overstated. Different regions have different governance structures and T&D systems, which significantly impact the success and viability of renewable energy resources. For example, the challenges in New York highlight the importance of capable governance and planning to avoid potential capacity shortages. Additionally, the integration of T&D values into market mechanisms is essential to ensure that DERs are properly compensated for their contributions to the grid. Finding the right balance between market dynamics, governance structures, and T&D values is key to building a reliable and efficient future grid.
The potential of vertically integrating the grid
One idea discussed in the podcast is the potential for vertically integrating the grid, where an entity, whether it be a co-op, municipal utility, or private company, takes control of the entire power system within a certain region. This would involve not only the generation and distribution of electricity, but also the implementation of advanced technologies like solar, batteries, and microgrids. The goal would be to provide customers with a guaranteed uptime and greater resiliency, while also potentially integrating distributed energy resources more efficiently.
Challenges with the current utility model
The podcast also delves into the challenges posed by the current utility model, particularly the regulated monopoly structure where utilities are given franchise rights and guaranteed returns on investments. This model has come under scrutiny in light of the changing energy landscape, with the rise of distributed energy resources and the need to address climate change. The question arises: Is this model still suitable in a world where technology enables more decentralized and customer-centric approaches to energy?
The evolution of DER markets
The podcast highlights the evolution of distributed energy resource (DER) markets, discussing how the market has matured over time. The emergence of scalable solutions, funding opportunities, and the growth of DER developers reflects a greater confidence in the viability of distributed energy resources. The focus has shifted from feed-in tariffs and incentives towards market-driven mechanisms and contracted revenue. Despite challenges, the podcast suggests that the market for DERs has matured and continues to grow, leading to more innovative solutions and opportunities.
We’re back! This time with a perfect warmup for DERvos in a few days with DERTF OG Ben Carron. Ben has not only worked for FERC, Nat Grid, SunRun, E3, and now Enel X, but also was one of the earliest presenters at our original, pre-pandemic “DG Beers” happy hours.
We wanted to have Ben on to get back to our energy market wonkery roots, so don’t worry—you won’t hear any stuff about twitter culture discourse on this ep. In it, we talk about the early “DG Beers” days, dunkelflaute, James’ take that maybe market structure doesn’t matter all that much for DERs, Ben’s take how maybe geography is more important than market structure, a reminder that ultimately DERs need to stand on their own merits, different schemes of crediting T&D vs. energy/capacity benefits, if renewables can thrive in a capacity market, trusting the deal-making nature of all governance structures, and so much more about what the hell else who knows! We barely even understand ourselves. Tune in to bathe in the wonkery!
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