Reforming Resource Adequacy Practices and Ensuring Reliability in the Clean Energy Transition Molly Robertson, Karen Palmer, and Todd Aagaard Report 23-05 May 2023 Insert title here on Master A A About the Authors Molly Robertson is a research associate at RFF working on topics related to the electric power sector, including grid decarbonization, electrification, and electricity market design. She has also contributed to RFF’s growing work on equitable community transition and environmental justice. She holds a master’s in public policy from the University of Michigan’s Ford School. Karen Palmer is a senior fellow at RFF and an expert on the economics of environmental, climate and public utility regulation of the electric power sector. Her work seeks to improve the design of environmental and technology regulations in the sector and the development of new institutions to help guide the ongoing transition of the electricity sector. To these ends, she explores climate policy design, analyzes efficient ways to promote use of renewable and other clean sources of electricity, and investigates new market designs, new approaches to electricity pricing and regulatory reforms to pave the way for long-term decarbonization of electricity supply and electrification of the energy economy. Todd Aagaard is a visiting fellow at RFF and has been a member of the faculty at the Villanova University Charles Widger School of Law since 2008. He served as Vice Dean of the Law School from 2015 to 2019. His scholarship focuses on environmental law, energy law, and administrative law. His publications include Energy-Environment Policy Alignments, 90 Wash. L. Rev. 1517 (2015); Environmental Law Outside the Canon, 89 Ind. L.J. 1239 (2014); Environmental Harms, Use Conflicts, and Neutral Baselines in Environmental Law, 60 Duke L.J. 1505 (2011); Environmental Law as a Legal Field: An Inquiry in Legal Taxonomy, 95 Cornell L. Rev. 221 (2010); and Factual Premises of Statutory Interpretation in Agency Review Cases, 77 Geo. Wash. L. Rev. (2009). In addition, he is a co-author of Practicing Environmental Law, a practicebased environmental law casebook published in 2017 by Foundation Press. Acknowledgments This paper includes insights from an invitation-only workshop hosted by RFF. We would like to give special thanks to the speakers at that event: Walter Graf (PJM), Madeline Mohrman (NYISO), Nick Pappas (NP Consulting), Matthew Barmack (Calpine), James Bushnell (UC Davis), Andrew Kleit (Penn State), Chiara Lo Prete (Penn State), Kathleen Spees (Brattle Group), and Susan Tierney (Analysis Group). Resources for the Future i About RFF Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy. Working papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review. The views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. Sharing Our Work Our work is available for sharing and adaptation under an Attribution-NonCommercialNoDerivatives 4.0 International (CC BY-NC-ND 4.0) license. You can copy and redistribute our material in any medium or format; you must give appropriate credit, provide a link to the license, and indicate if changes were made, and you may not apply additional restrictions. You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use. You may not use the material for commercial purposes. If you remix, transform, or build upon the material, you may not distribute the modified material. For more information, visit https://creativecommons.org/licenses/by-nc-nd/4.0/. Reforming Resource Adequacy Practices and Ensuring Reliability in the Clean Energy Transition ii Contents 1. Introduction 1 3. Adapting Resource Adequacy Approaches for the Future 3 2. Resource Adequacy Today 3.1. Modernizing Generation Modeling 1 3 3.2. Adopting Marginal ELCC 4 3.4. Changing Penalty Structures and Incentives 8 3.3. Differentiating Resource Value 3.5. Considering Slice-of-Day and Seasona