The power system is currently experiencing a significant transformation, including a rapidly evolving resource mix, growth of distributed energy resources, more active consumer participation, increased deployment of energy storage and hybrid resources, and more advanced communication and control requirements. These changes in the power system present numerous challenges and opportunities that span the technical, economic, implementation, and policy spectrum for system operators.

To help address these challenges, a collaboration among five research institutions—Argonne National Laboratory, the National Renewable Energy Laboratory, Lawrence Berkeley National Laboratory, the Electric Power Research Institute, and Johns Hopkins University—has been established through the U.S. Department of Energy Grid Modernization Lab Consortium to provide technical assistance to the seven U.S. Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs). The three-year project aims to leverage the advanced methods, tools, datasets, and resources of the collaborators to provide robust analytical support to address the high-priority market challenges faced in the two- to ten-year time horizon.

The team recently released its first publication, “Research Priorities and Opportunities in United States Competitive Wholesale Electricity Markets,” which details challenges associated with wholesale electricity market design across six high-level topic areas. These six topic areas, and specific market design challenges and opportunities within each topic area, were identified through an extensive literature review and quantitatively ranked based on feedback from representatives of the seven U.S. ISO/RTOs during an April 2020 workshop. The resultant ranking is as follows:

  1. Incentivizing reliability services and operational flexibility;
  2. Integrating new and emerging technologies in wholesale market operations;
  3. Resource adequacy and system resilience;
  4. Energy price formation;
  5. Transmission–distribution coordination and wholesale–retail interactions; and
  6. Transmission expansion planning and financial transmission rights.

The report finds that the rapid growth of emerging technologies may motivate changes to current wholesale electricity market design  to efficiently ensure long-term operational reliability. Markets must also ensure that system resources are appropriately incentivized to provide the grid services and operational flexibility needed to maintain system reliability in an economically efficient manner. Furthermore, over planning horizons, ensuring that markets provide revenue sufficiency for the resources needed to guarantee long-term reliability—while also providing efficient price signals for market exit when appropriate—is a key market challenge, particularly in power systems with increasing penetrations of zero-marginal cost resources.

In addition to providing a literature review of current market design challenges, this report also serves as a broad research agenda for future work of highest priority to the U.S. ISOs/RTOs. The project team is currently executing three parallel technical tasks for the first application to address ISO/RTO-identified challenges related to flexibility and operational reliability, resource adequacy, and long-term reliability. The first phase of this research will conclude in September 2021, at which point the lab team will solicit further ISO/RTO feedback to develop the second phase of work that will continue into early 2023.