The options they had were:
1. Eliminate the resource adequacy construct entirely
The need for a guarantee of reliable supply and the current lack of demand-side response makes this solution infeasible at this time. This may be a good end-state solution that will develop over time as the market continues to mature and significant demand response develops. Therefore, this solution will need to be coupled with an interim solution, and it will receive consideration at a future date.
2. Administrative solution
Under this solution, an administrative fee would be set, which would be called a surcharge for reliability. This fee, which is similar to a capacity deficiency rate, would be paid by all load which had not self-supplied or bilaterally contracted with generation by a certain forward date. The administrative fee would be set periodically based on analytical analysis that includes locational components. When setting the surcharge, the setting entity would consider the need to incent demand response, certain generation types and certain generation fuel sources to maintain acceptable generation reliability standards. The advantage of this solution would be that it could be constructed to deal with the issues that were highlighted above. The disadvantage of this solution is that it requires an entity to set the rates. This solution suggests a return to a regulated regime and would deprive consumers of the advantages of market-based competition .
3. Reliability Pricing solution
This solution is based on developing an algorithm that determines a reliability-based price. The key advantage of using an algorithmic based approach is that it sets prices based on key reliability-based metrics that are developed based on technical analysis. These metrics drive the calculation of a Reliability Pricing result through an optimization algorithm. Another advantage of this approach is that it provides a mechanism under which the pricing incentives will drive conformance with reliability requirements on system-wide and locational basis. This approach is best described as an optimization-based market clearing algorithm which minimizes the costs to meet capacity requirements as constrained by the reliability-based metrics. This allows the issues identified above to be resolved through an incentive-based approach, and it also provides a mechanism to create viable demand-response alternatives to resolve some issues related to locational constraints.
1. The need for a guarantee of reliable supply and the current lack of demand-side response makes this solution infeasible at this time.