Argonne National Laboratory

Grid Integration of Renewable Energy and Electricity Market Design

The levels of installed renewable generation such as wind and solar energy have increased significantly in recent years. Wind and solar power have very low production costs because their fuel is a free source, but these resources are, by their very nature, variable and uncertain. Variable renewable generation is primarily an energy resource that has limited capacity value relative to its rated capacity. This is because periods of high energy output may not correspond to times of high demand or risk of insufficient generation. Together, these characteristics create challenges to reliably operating the power system at least cost and planning for the expansion of the power system to meet the changing needs of the future.

At the same time, the special characteristics of electricity markets and their close ties to the physical power system’s operational and planning needs creates unique challenges in the design of wholesale electricity markets. The operators and planners, whose primary goal is to maintain reliability in the short and long term, cannot achieve their objective without some recognition of how the electricity market works. Likewise, regulators and market designers cannot create new market rules without recognition of the physics of the grid and system reliability needs.

Argonne is leveraging its long experience in energy market analysis and its research on variable renewable resource forecasting to develop tools and techniques for analysis and planning of electricity markets with increasing shares of variable renewable generation. Argonne has developed several new concepts, algorithms, methods, and tools to enable future low-carbon power systems. The results from this research provide industry and regulators with a better understanding of the impacts of renewables on wholesale energy and ancillary service markets and will in the long run contribute to a more rapid and cost-effective transition to cleaner sources of electricity.