Successful renewable energy development in a competitive electricity market: A Texas case study

The development of renewable energy in markets with competition at wholesale and retail levels poses challenges not present in areas served by vertically-integrated utilities. The intermittent nature of some renewable energy resources impact reliability, operations, and market prices, in turn affecting all market participants. Meeting renewable energy goals may require coordination among many market players.These challenges may be successfully overcome by imposing goals, establishing trading mechanisms, and implementing operational changes in competitive markets. This strategy has contributed to Texas’ leadership among all US states in non-hydro renewable energy production. While Texas has been largely successful in accommodating over 9000 MW of wind power capacity, this extensive reliance upon wind power has also created numerous problems. Higher levels of operating reserves must now be procured. Market prices often go negative in the proximity of wind farms. Inaccurate wind forecasts have led to reliability problems. Five billion dollars in transmission investment will be necessary to facilitate further wind farm projects. Despite these costs, wind power is generally viewed as a net benefit.

Research Highlights▶ Texas rapidly emerged as a leader in renewable energy development. ▶ This state's experiences demonstrate that the right combination of policies to lead to rapid renewable energy development in a region with a very competitive electricity market. ▶ Wind power development has lead to various operational challenges.