Procuring Flexibility in Wholesale Electricity Markets

Abstract

Wholesale electricity market operators will require additional flexibility in the future as grid-scale intermittent resource penetration increases and as loads become less certain due to behind-the-meter investments, such as distributed energy resources. Given the market design changes required to address this need, this paper presents an overview of market-based mechanisms that wholesale electricity market operators (regional transmission organizations (“RTOs”) and independent system operators (“ISOs”) in the US have adopted or considered adopting to increase operational flexibility. The paper discusses the two ISOs/RTOs that have introduced flexible ramping products and notes that others have considered procuring additional reserves as a means to increase flexibility. The paper also discusses the extent to which a capacity-like payment can be used to procure flexibity.