Addressing Market Issues in Electrical Power Systems with Large Shares of Variable Renewable Energy

This paper reports recent findings from IEA Wind TCP Task 25, which compiles international experiences and research related to large-scale integration of wind and other renewable energy. In the paper, we address the main challenges for market integration of variable renewable energy, relating to price formation, cost recovery, balancing and other grid services. The paper gives an overview of recent scenario studies on electricity price impacts of (1) various generation, energy storage and demand types in different markets, and (2) different market designs and energy/climate policies. Studying markets with very high shares of variable renewable energy requires an improved set of analysis tools for forecasting market outcomes, estimating flexibility needs and sources, and assessing resource adequacy. Key market features need to be investigated within these improved analytical capabilities for systems transitioning to high shares of variable renewable energy, storage and flexible demand. System services that can be supported by markets will likely need to be revisited. Finally, this paper identifies open questions and suggested future market design work for supporting systems with very high shares of variable renewable energy, which are to be addressed in follow-up work of Task 25 collaborative research.