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Category Archives: L94

Resource Adequacy and Energy-Only Market Design: Assessing The Impact of ERCOT’s Operating Reserve Demand Curve1

By Max Lipscomb

I examine the effect of an Operating Reserve Demand Curve (ORDC) which was recently implemented in Texas to assist power producers in recovering their fixed investment costs. I characterize and employ an economic plant dispatch model to examine the ORDC’s effects on representative natural gas plants in Texas, allowing me to determine whether or not the ORDC is likely to induce new capital deployment. I find that the ORDC’s positive effects are minimal and likely negated by the policy’s complexity, sending unclear signals to prospective investors. My results suggest that the policy itself is insufficient to incentivize the construction of new generation capacity in Texas’s electricity market.

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Advisor: James Roberts | JEL Codes: L9, L94, L97 | Tagged: Demand Curve, Electricity, Energy-only Operting Reserve, ERCOT Texas, Resource Adequacy, Utility Power

Optimizing the Electricity Bill Creating a two-part electricity tariffs to induce a targeted level of rooftop solar adoption while meeting utility operating expenses

By Hoel Weisner

Renewable energy technologies are a much needed, clean alternative to the conventional fossil fuel electricity power plants of the last century. The market for installing solar panels on rooftops is a highly promising avenue for expanding the use of these technologies, but its profitability depends significantly on the electricity prices offered by electric utilities. Investing in solar panels offset a percentage of the electricity purchased from the utility. This paper models the investment decision of electricity consumers and looks at what the optimal per unit price of electricity should be in order to make building solar panels a profitable decision for a target share of households. The model shows how this optimal rate decreases at lower prices of investing, when the share of utility-purchased electricity offset by the panels increases, and when the target level of solar adoption decreases. Finally, it looks at how this per unit rate impacts the utility’s decision to set a fixed monthly charge for electricity in order to recover all of its operating expenses.

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Advisor: Leslie Marx | JEL Codes: L94, Q42, Q48 | Tagged: Electricity Price, Renewable Energy, Solar Electricity


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