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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.
Advisor: James Roberts, Alison Hagy, Kent Kimbrough | JEL Codes: L9, L94, L97 | Tagged: Demand Curve, Electricity, Energy-only Operting Reserve, ERCOT Texas, Resource Adequacy, Utility Power
A Case Study on the Informational Role of Futures Markets: Can Weather Futures Forecast Electricity Consumption?
by Ying Chiat Ho
Abstract
This paper provides a case study on the informational role of futures prices by investigating the ability of Cooling Degree Day (CDD) futures prices to forecast electricity consumption for New York State. I develop a cross-sectional model relating electricity consumption with the cumulative CDDs in a month for New York City and utilize the 30-day ahead settlement prices of the New York CDD futures contracts within the model to forecast electricity consumption. The forecasts derived explain up to 94.68% of the variation in actual electricity consumption, suggesting that the CDD futures prices contain useful forward-looking information about electricity consumption.
Professor Edward Tower, Faculty Advisor
JEL Codes: G13,
