A Marginal Reliability Impact Based Accreditation Framework for Capacity Markets

TL;DR

This paper introduces a Marginal Reliability Impact (MRI) framework for capacity markets that aligns resource accreditation with reliability contribution, promoting substitutability and efficiency in resource valuation.

Contribution

It proposes a novel MRI-based accreditation method that enhances substitutability and accurately reflects reliability contributions in capacity markets.

Findings

MRI accreditation aligns resource value with reliability impact

Substitutability between resources and demand improves market efficiency

Framework better characterizes resource adequacy problems

Abstract

This paper presents a Marginal Reliability Impact (MRI) based resource accreditation framework for capacity market design. Under this framework, a resource is accredited based on its marginal impact on system reliability, thus aligning the resource accreditation value with its reliability contribution. A key feature of the MRI based accreditation is that the accredited capacities supplied by different resources to the capacity market are substitutable in reliability contribution, a desired feature of homogeneous products. Moreover, with MRI based capacity demand, substitutability between supply and demand for capacity is also achieved. As a result, a capacity market with the MRI based capacity product can better characterize the underlying resource adequacy problem and lead to more efficient market outcomes.