Texas regulators explore market designs for a high-renewables electricity system

Frank Wolak and Mark Thurber ran a game-based workshop for staff at the Public Utility Commission of Texas (PUCT) in Austin on October 23-24 to explore ways to keep electricity supply reliable in places like wind-rich Texas that have very high shares of intermittent renewable energy.

One traditional approach to this "resource adequacy" problem, called a capacity mechanism, pays dispatchable generating units like gas-fired power plants to sit around and be ready for low-renewables periods. But teams of PUCT staff playing the role of generating companies found they could push electricity prices to very high levels under the capacity mechanism -- not a desirable outcome for the ratepayers PUCT is charged with protecting! Another mechanism, Standardized Fixed-Price Forward Contracts (SFPFCs), proved in the games to be far more effective at protecting consumer interests while still providing generators with a dependable revenue stream.