The Brattle Group Economists Recommend Changes to British and Spanish Power Market Design to Meet Resource Adequacy and Low Carbon Objectives

LONDON, Sept. 23 /PRNewswire/ -- A report by economists at The Brattle Group recommends reforms to the British and Spanish power markets that would help to achieve both resource adequacy and government-mandated carbon reduction objectives.  The findings were presented today by Brattle principal Serena Hesmondhalgh during a session on investment incentives in electricity markets at the 8th British Institute of Energy Economics (BIEE) Academic Conference in Oxford.

The analysis draws on international experience to evaluate how different wholesale market models deal with the dual objectives, and concludes that all market models face a growing challenge to ensure resource adequacy in the presence of low carbon policy objectives.  The authors illustrate their findings by referring to the challenges facing Spain and Great Britain (GB).  While Spain is suffering from an excess of capacity, GB may be facing a capacity shortage.  However, both markets need to continue building renewables in order to meet their EU targets.  The authors recommend that both Spain and GB introduce resource adequacy markets to ensure that sufficient operating reserves (including demand response) are available to cope with an increasing share of intermittent generation – an important issue that was identified in their analyses of low carbon objectives under all market models.  

"After evaluating various market models, we found that the very different problems facing the electricity markets in Spain and Great Britain could be solved by broadly similar market-based approaches," Dr. Hesmondhalgh said in her remarks at the BIEE conference. "We recommend that regulators and governments resist the urge to impose highly centralised, non-market-based solutions to these problems."

The paper, "Resource Adequacy and Renewable Energy in Competitive Wholesale Electricity Markets," was written by Brattle principals Serena Hesmondhalgh, Johannes Pfeifenberger and David Robinson, and is available for download at www.brattle.com.  

The Brattle Group provides consulting services and expert testimony in economics and finance to corporations, law firms and public agencies worldwide.  Areas of expertise include antitrust and competition; valuation and damages; utility regulatory policy and ratemaking; and regulation and planning in network industries.  For more information, please visit www.brattle.com.

SOURCE The Brattle Group