North American Resource Adequacy: "Déjà Vu, All Over Again"

Restructuring of the US electric power system that began in the late 1990’s appears to have run aground over the question of the assurance of both regulatory resource adequacy and generator long-term revenue sufficiency. The energy and capacity markets that have been designed for a number of the centralized markets in the US and elsewhere have not functioned as designed. Energy only markets such as ERCOT appear to have functioned equally poorly, albeit for totally different reasons. This paper reviews the underlying structure and logic of both the Capacity Market structures and the alternatives available in the energy-only markets. It focuses attention on the reality of the “missing money.” The paper returns to first principles in market design and concludes with an argument for an alternative energy only framework that provides for resource adequacy, revenue recovery and increased price signaling to large customers.