A Proposed Design for a Short-Term Resource Adequacy Program

Short-term resource adequacy is the ability of a system with a set of given resources to meet the load over the short term. In the aftermath of the 2000–2001 California crisis, focus on resource adequacy has come to the forefront of market design issues. Various approaches, such as capacity requirements, capacity payments and financial options requirements, have been proposed to ensure resource adequacy in electricity markets. We propose a design of a short-term resource adequacy program based on capacity requirements expressed in terms of a price sensitive demand curve. The program is formulated so as to give incentives for providing capacity to markets and to mete out penalties for nonperformance situations. The probabilistic modeling of the uncertainty in the availability of generating resources and in the load allows the evaluation of reliability in terms of widely-used metrics. Through the explicit representation of the strategic behavior of market players, capacity withholding impacts are directly measurable. The analysis of the proposed design and the simulation of a simple implementation show that the program results in improved reliability. Reduction of the total system costs are obtained when key program parameters are appropriately chosen. The design has proven effective under an extensive range of different scenarios in the various systems tested. The improvements attainable with the implementation of the program design are illustrated with representative simulation results on different sized systems. The proposed design with the ability to evaluate the linkage between reliability and markets contributes to the electricity market design area.