The National Renewable Energy Laboratory and Resources for the Future held a workshop governed by Chatham House rules to discuss the changes underway in the electric power sector and extract insights for future market design and policy. This report summarizes the insights from that workshop. The workshop agenda and participant list are included at the end of the report. Workshop participants discussed the economic, technological, and policy drivers of declining marginal costs of generation and expanding capacity of generation resources. Participants agreed that market and policy design should serve the central goal of improving economic efficiency, but debated how to properly value the various attributes of different generation resources while also creating incentives for efficient long-term investment and balancing the policy objectives of individual states. The workshop illuminated a set of important questions for future research:
- What specific attributes of generation resources should be explicitly valued in wholesale markets and how should this valuation be done?
- Can scarcity pricing, revealed through variability in short-term price signals for generation services, create adequate incentives for long-term investments?
- In organized markets, are capacity markets necessary to create efficient investment incentives, or could an alternative market design create incentives for both efficient investment and dispatch?
- How can demand-side services and demand responsiveness be brought into the market as resources, while balancing political considerations and consumers’ aversion to risk in electricity pricing?