Electricity Markets

Glick calls for reexamination of mandatory capacity markets

Richard Glick, a Commissioner with the Federal Energy Regulatory Commission, on July 14 called for a reexamination of mandatory capacity markets and addressed the question of what a transition away from these markets would look like in terms of getting over implementation hurdles.

He made his remarks during a Wholesale Markets Virtual Summit held by the American Public Power Association.

“In my opinion, we need to reexamine these mandatory capacity markets in the first place,” he said. “We need to decide first of all whether they’re necessary or not.”

Glick said that resource adequacy is extremely important and is an “issue that’s never going to go away in terms of how we look at these markets.”

He noted that there are various ways that regions with organized markets address this issue. “You have the Texas model on the one hand, which doesn’t have a capacity market at all. Then you have ISO New England, PJM and New York, which have mandatory capacity markets” and then there are other regions that are in between. He said the Midcontinent Independent System Operator is a good example, “where I think there’s greater involvement of the states in terms of resource adequacy decisions,” he said.

“We need to look at various models and really determine whether the mandatory capacity model in some of the RTOs is really the way we want to go,” he said.

The country is undergoing “a dramatic transformation” in terms of the way that electricity is being generated and transmitted “and I think some of that is impacting the way we need to take a look at these markets,” he said.

“In my view we need a holistic approach,” Glick said. “We need to take a step back” and ask the question of whether, when it comes to markets – especially on the resource adequacy side – “are we really getting at what we need to get at, what the future grid looks like.”

He said that over time, the country will see a lot more intermittent generation “and I think we need more flexibility.”

Glick said that “we need to figure out” how markets can be designed in a way that sufficiently incent or compensate generation or other resources “for the flexibility that they provide.”

Elise Caplan, director of electric markets analysis at APPA, asked Glick to detail what he envisions a transition away from mandatory capacity markets would look like in terms of getting over implementation hurdles.

With respect to the RTO stakeholder process, “that probably needs some revisions or reconsideration as it goes.”

As for RTOs, “it would take a while to rethink the best way to do it, but also you have to bring in all the states and obviously, a situation like New York, it’s pretty easy. You’ve got one state. In a situation like PJM or the New England ISO, you have a number of different states with sometimes different views on these things.”

Glick said that ideally he would like to see the Commission issue a notice of inquiry for the RTOs to consider and comment on various questions associated with resource adequacy and share ideas on different types of approaches.