We have been sounding the alarm that we are falling forward towards decarbonizing the grid without a plan of action. We are simply hoping that incentives and the free market will miraculously make it all happen.
One of the most challenging aspects of the transition is revamping the mechanism that controls the market for energy. To quote from a recent article by Vince Duane in EnergyCentral:
“What’s also becoming increasingly apparent is that the character of these new technologies gravely complicates the single clearing price auction model ISOs use in energy, capacity and certain ancillary service markets. In this op-ed, co-authored with former FERC Commissioner Tony Clark, I argue the root of the problem is an assumption in the pricing model that all MWs offered and all MWHs injected, from whatever source, can be treated as fungible. Holding to this assumption has always been tricky, as anyone aware of the complex price formation and market settlement rules in ISOs can attest. With a supply stack increasingly comprised of resources having inherently different operating attributes, it seems the single clearing price model (despite its advantages and consequently our natural reluctance to confront its failings) will result in more volatile, less reliable and less economically sound outcomes. The time has come to stop thinking of the products bought and sold in ISO markets as commodities.”
What does this mean? We are moving forward with fundamentally changing the largest and most complex machine on the planet and we haven’t figured out how the price discovery system will work. The most concerning aspect is this part of the statement: “will result in more volatile, less reliable and less economically sound outcomes.”
More volatility and less reliability. That sounds bad and it is.
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