Rethinking Gas Markets – and Capacity

The “US Model” of natural gas markets is based on long-term, point-to-point commercial capacity rights that reflect the physical capacity of the pipeline and are traded frequently among system users (shippers) in markets independent of the transmission system operator (TSO). When physical capacity is complex and scarce and the gas market is dynamic these rights must be continually reallocated and reconfigured, making trading difficult/illiquid and market outcomes suboptimal. read more →

Implementation of a Scheduling and Pricing Model for Natural Gas

Since 1999, the Australian state of Victoria has operated a natural gas spot market to both determine daily prices for natural gas and develop an optimal schedule for the market based on an LP (Linear Programming) approximation to the underlying inter-temporal nonlinear aspects of the gas flow optimization problem. This market employs a dispatch optimization model and a related market clearing model. Here we present the model employed for both the operational scheduling and price determination. read more →

An LP Based Market Design for Natural Gas

Many electricity markets are now cleared using Linear Programming (LP) formulations that simultaneously determine an optimal dispatch and corresponding nodal prices, for each market dispatch interval. Although natural gas markets have traditionally operated in a very different fashion, the same basic concept can be applied. read more →

Regional Electricity Trading: Opportunities and Challenges for Ontario

The purpose of this paper is to discuss the role of regional trade in electricity, the costs and benefits of expanding regional trade, some of the obstacles to such expansion and what might be done to reduce these obstacles. Although the discussion often refers to Ontario and its context within Canada and North America, most of the discussion here is general and applies to any large, modern electricity system. read more →

In Defense of Markets

Since electricity restructuring and competition first commenced it has been opposed by an assortment of anti-market naysayers and recalcitrants, some driven by philosophical dislike, and others by the desire to preserve a lucrative status quo. Over the years, these groups have advanced a steady litany of excuses regarding why markets won’t work – which have been just as quickly debunked by real examples of success … The excuses of the anti-marketeers are no more than delaying tactics. Ultimately, competition must prevail. read more →

Spot Market Clearing

Recent years have seen a growing awareness of credit issues in the energy industry, and improved efforts to manage these risks. Despite this trend, however, the credit risk protections employed by most electricity spot markets remain rudimentary, placing participants at risk of receiving a socialized share of large, unpredictable and unhedgeable losses. Spot Market Clearing offers a comprehensive solution to this problem, leveraging the proven clearing house infrastructure of futures markets, and extending it, to provide robust counter-party credit protection for spot markets in electricity. read more →

Competitive Electricity Markets: Opportunity or Threat? A Customer Perspective

Recent electricity price rises experienced by eligible customers have led to some discontent with the outcomes of market competition. Rather than a discussion of philosophical pros and cons, this paper takes a pragmatic look at the implications of competition for a medium-to-large sized customer. Specifically, it examines the challenges this creates for customers, given the unique nature of electricity, how customers can respond to these challenges, and potential opportunities this might provide. read more →

Reliability, Regions and RTOs

On August 14, 2003, a cascading failure blacked out significant areas of the US and Canada. This incident was a fundamental failure to maintain system reliability, or “keep the lights on”. With the interim report of the outage task force just released, some already apparent lessons are being re-affirmed. In a heavily interconnected system it is essential to manage reliability on a regional basis – rather than through a large number of disparate, utility-based control areas. Regional Transmission Organisations (RTOs), independent of individual utilities, are the logical entities to provide this management. read more →

The Case for Financially-Settled Electricity Contracts

Forward contracts reaching maturity result in one of two outcomes – physical delivery or financial settlement. This paper puts forward the argument that, where reliable spot market price indices exist, electricity derivatives should be financially-settled. read more →

Through the Furnace – TheTransformation of Energy Trading

Energy markets are experiencing a period of unprecedented upheaval. Deregulation is driving competition and trading into previous monopoly domains, leading to a fundamental redistribution of risk from end-consumers to market participants. Recent reassessment of these risks has resulted in an industry-wide credit crunch, significantly impacting share values and market liquidity, and forcing a renewed focus on risk management in all its guises. read more →



Critique of IHS Markit Nuclear Resilience Paper

In April 2018, IHS Markit published a paper entitled “Ensuring resilient and efficient PJM electricity supply; The value of cost-effective nuclear resources in the PJM power supply portfolio.” Several clients contacted us regarding the paper, expressing a concern that it presented a number of wrong-headed, anti-market ideas, and requesting our thoughts. Here they are. read more →

International Gas Market Study

This study, carried out for the Australian Energy Market Commission (AEMC), examined the structure and operational mechanisms for a range of gas markets in the US and Europe. read more →

IRC Resource Investment Study

Market Reform was engaged by the ISO/RTO Council (IRC), the umbrella group for the nine US and Canadian electricity system/market operators, to investigate the factors that drive financial investment in generation and other system resource, and how these are influenced by ISO policy/market design decisions and the revenue streams flowing out of the ISO-operated markets. This final report was presented to the IRC’s Annual Board Conference in May 2015. read more →

Evolution of Gas Markets in an Australian Context

At the kickoff of its Gas Market Review, the Australian Energy Market Commission (AEMC) conducted a public forum in Sydney. Market Reform was invited to speak to this forum on the evolution of gas markets in other countries, and lessons that might infer for the East Coast gas markets of Australia read more →

Gas Market Evolution

This report was prepared for the Australian Energy Market Operator (AEMO) , and was published coincident with the launch of trading at the natural gas supply hub at Wallumbilla in early 2014. Using international experience in the evolution of energy markets as a reference, this paper discusses the key features of a successful trading market, how the market at Wallumbilla and in Eastern Australia more generally might be expected to develop, and steps that might be taken to help it along. read report →

Co-Evolution of Network Energy Markets

This presentation was delivered by Dr. Larry Ruff to the 2013 annual meeting of the Association of Power Exchanges. It addresses the co-evolution of network energy markets, including the contribution that developments in electricity markets can make to ongoing development of gas markets as they take on increasingly network-like characteristics. read more →

PJM Credit and Clearing

Following some significant financial defaults by participants in its markets, PJM engaged Market Reform to provide advice concerning how it could improve its management of credit risk. A benchmarking study of credit risk management practices in a range of spot electricity and other markets was also conducted. This work also helped to inform subsequent rule-making by FERC. Normally our client work is confidential, but in this instance PJM has placed it in the public domain, allowing it to be made available here.
read findings and recommendations report →
read credit comparison report →

Dispatch-Based Pricing in Decentralised Electricity Systems

Brendan Ring’s PhD thesis, published in 1995, is one of the first pieces of work to comprehensively explore the theory of nodal pricing and how it might be applied to electricity markets. It pre-dates the implementation of nodal pricing in any electricity market. read more →