All posts by David Patton

How can markets set efficient prices in peak demand hours?

Prices during peak demand hours are critical for the economic efficiency of electricity markets.  During peak times, quick-starting peaking units are usually started and dispatched.  In the tightest hours, operators may take emergency actions to increase the real-time supply or decrease demand.  Efficient pricing in peak hours requires that the costs of these actions be...

Do State Public Policies Undermine Competitive Electricity Markets?

The bad news is that state public policies often do undermine competitive electricity markets.  The good news is that the harm can be mitigated. States have become increasingly active in pursuing environmental goals by subsidizing investment in renewable energy generation, including solar, wind, and hydroelectric resources.  This subsidized entry of capacity is problematic to the...

Why Do Capacity Markets Exist?

Most electricity markets have requirements to maintain a minimum level of generating capacity to ensure that they can keep the lights on under nearly all conditions.  Energy and operating reserve markets will typically not provide enough revenue to keep this quantity of generation in service, so capacity markets were developed to provide economic signals that...