Preparing for decarbonization: Reforming US power markets for the energy transition

Transmission lines in the fog in Washington state. Unsplash/Peter Geo

The decarbonization of the United States power sector risks being slowed by deficiencies that have persisted in organized power markets since restructuring. These deficiencies, along with challenges introduced by an increasingly intermittent and decentralized resource mix, pose fundamental questions about how decarbonized power markets should be designed and operated. 

  • What is the role of centralized capacity markets as they exist today, which do not procure the flexible capacity required for a renewables-based grid? 
  • What is the role of real-time energy markets in accounting for generator emissions, and in accommodating state clean energy policies more generally?
  • How can markets break the vicious cycle between insufficient price signals for generator investment and actions taken out-of-market by operators in the name of reliability?
  • How should distributed energy resources such as electric vehicles participate in markets, and what potential barriers to entry persist despite FERC’s landmark Order 2222?
  • How can markets ensure energy security when supply is intermittent, and in particular how can a decarbonized grid replace the physical inertia relied upon historically from fossil generators?  

Resolution of these questions will determine both the pace and the depth that the power sector can securely decarbonize, and the role that markets play within it. In his Atlantic Council report, Preparing for Decarbonization: Reforming US Power Markets for the Energy Transition, Ben Hertz-Shargel examines these key questions that have accompanied power sector transformation, and he provides recommendations for reforming power markets.

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