Brattle experts have supported efforts across the globe to design energy and ancillary service markets that are competitive, economically efficient, flexible, and enable high penetrations of renewables. We have supported several balancing area consolidation initiatives throughout North America. We have helped investors understand the business case for new technologies such as utility-scale energy storage, the ways in which such technologies can participate in energy and ancillary service markets, and the enhancements needed to existing market designs in order to support these technologies. Our experts have supported system operators and regulators in designing rules to mitigate the exercise of market power in energy markets.
In 2016, Brattle experts led a team of multiple consulting companies to help California ISO evaluate ISO regionalization and transitioning the Western Interconnection into a locational marginal cost-based full “Day-2” energy market with centralized optimized day-ahead unit commitment and real-time dispatch. Our role included using the PSO model (a chronological LMP model with very detailed representation of short time interval operations and uncertainties) to develop West-wide nodal production cost simulations for 2020-30 to assess impacts on ratepayers, emissions, grid operations, and the ability to integrate large amounts of variable renewable generation across the region. We also analyzed the findings of other regional markets that have gone through similar or parallel transitions, reviewing two dozen ex-post and ex-ante studies of the costs and benefits of regionalization, of transitioning from zonal to nodal market design, and migrating from a real-time imbalance market to a full day-ahead market with optimized unit commitments and ancillary services markets. Our work culminated in a public report and several presentations to stakeholder groups across the West and in California. It provided the analytical foundation for active ongoing multi-state discussions about ISO regionalization.
Brattle evaluated the economic benefits of the Electric Reliability Council of Texas’ (ERCOT) proposed Future of Ancillary Services (FAS) market design. ERCOT proposed FAS to efficiently maintain grid reliability as traditional generation is replaced by wind and solar PV generation and as new technologies (e.g., advanced batteries) offer new ways to provide ancillary services. The proposed design would have unbundled ancillary services and fine-tuned the service requirements to system conditions and resource capabilities. The report found that FAS would have offered economic benefits on the order of ten times the implementation costs, improved system reliability, and provided greater flexibility for meeting reliability needs as system conditions and resource capabilities evolve.
Brattle experts assisted the Hawaiian Electric Companies (HECO) in developing its Power Supply Improvement Plan. Our support focused on how to maintain system security as renewable penetration increases toward 100% and displaces traditional synchronous generation. We evaluated the ancillary services needs to support system frequency following a contingency. We defined technology-neutral requirements that may be met by demand response, distributed resources, and new technologies as well as traditional resources. Finally, we evaluated how battery storage, curtailment of variable energy resources, and more flexible operation of remaining traditional resources could be used in real-time operations.
Brattle experts assisted the Government of Western Australia’s Public Utilities Office (PUO) in designing market power mitigation measures for its newly reformed energy market. As part of our support, we established design objectives, interviewed stakeholders, assessed specific market characteristics affecting the design, synthesized lessons learned from the current Western Australia energy market and several international markets, and proposed an approach to best meet the design objectives. Brattle’s proposal included defining screens and mitigation measures for day-ahead and real-time energy and ancillary services markets.
For a potential investor in battery storage technology, Brattle experts analyzed PJM’s real-time market participation rules for storage. We developed a real-time energy and ancillary service bidding strategy that the asset owner could employ to nearly optimize its operations, given expectations for prices and its own operations and constraints for the following several hours. We then calculated the revenues that storage devices of various efficiencies and durations could earn by employing the bidding strategy. We identified changes in PJM’s real-time bid/offer rules that PJM would have to implement in order to fully enable this efficient bidding strategy. Finally, we forecasted the capacity market revenues that storage devices of different configurations could earn, as well as their risk of performance penalties.
Complex business and legal matters require intellectually honest and analytically rigorous solutions that are thoughtfully developed and clearly communicated. We apply economic and finance principles with uncompromising quality to achieve clarity in the face of complexity. Independent analysis, responsive execution, and compelling presentation. That’s Brattle. That’s the Power of Economics.