As states have increasingly moved to implement state-specific energy policies, tensions have grown between these states and the regional wholesale electricity markets that serve them.
Although regional transmission organizations (RTOs) oversee the markets and manage the electricity grid, states’ right to pursue certain energy policies–such as renewable portfolio standards and tax incentives for preferred generation resources–is raising fundamental questions.
A new primer co-authored by the Great Plains Institute and Duke University’s Nicholas Institute for Environmental Policy Solutions explains the workings of regional electricity markets and the effect of state policies on them, presenting illustrative examples of state policy-regional market interaction and summarizing six proposals for changing RTO market design.
In a companion Q&A, we discuss the phenomena renewing attention to RTO market design, the impulses behind some typical state energy policies, the ways that those policies can affect regional market outcomes, and two challenges of current proposals to better align states’ energy goals and RTO market design.
