Standardized Contracts with Swing for the Market-Supported Procurement of Energy and Reserve: Illustrative Examples

The current design of wholesale electric power markets makes it difficult to ensure appropriate compensation for many important services, such as flexibility in start-up times, ramp-rates, power dispatch levels, and duration. This study examines the possibility of facilitating appropriate compensation through the introduction of standardized energy/reserve contracts with swing (flexibility) in their contractual terms. Concrete examples are used to demonstrate how the trading of these standardized contracts can be supported by linked day-ahead and real-time markets in a manner that permits efficient real-time load balancing subject to system constraints and reserve requirements.  Comparisons with existing wholesale electric power markets are given, and key policy implications are highlighted.