IEEE Power & Energy Magazine - January/February 2017 - 71

no firm means available. Conversely, remuneration for these
balancing means must be fair and not over-reward them.
Finally, careful thought will be necessary for proper
price-setting schemes in a (possibly) future all zero-marginal-cost generation environment, complemented by storage with finite losses. Appropriate market rules should allow
prices to be based on the opportunity cost as seen by the
market. Artificial pricing schemes will likely lead to economic inefficiencies.

Conclusions
The current set of energy policy instruments is characterized
by varying degrees of effectiveness, and policies sometimes
counteract one another. The full system costs of the resulting
tangle of incentives often are not fully accounted for, and they
are not well balanced and nontransparent, challenging system
efficiency. Indeed, because of interacting policy choices and
regulations, many energy markets are distorted by considerable hidden system costs, eventually to be paid by consumers, taxpayers, or shareholders (which often include pension
funds). Because of a lack of economic bulk electricity storage,
interactions within the electricity system and with other sectors, such as natural gas and heating, require increased flexibility for smooth operation and cost-effective performance.
A well thought-through and consistent policy framework
is called for, ideally with some stability in the regulatory
framework (and certainly without retroactive measures).
Key will be clear, transparent, but comprehensive regulation,
whereby market players (such as aggregators and energyservice companies) have the freedom to provide the services
requested by customers. Furthermore, targets and specifications should be set to be as independent as possible from
specific technologies, so markets can decide how to reach a
certain target or meet a certain specification (whereby both
supply- and demand-side actions, combined with storage,
can truly compete across system levels and borders).
In any case, because of the complexities we have described,
quick-and-dirty regulation will likely backfire, and even simple, positive-seeming measures may lead to unforeseen side
effects because of negative feedback and system interactions.
Policy makers are, therefore, advised to perform careful
system-wide studies to simulate and understand the system's
behavior and adjust draft legislation and/or regulation before
any rules are implemented.

For Further Reading
J. Delbeke and P. Vis, Eds. (2016). EU Climate Policy Explained. Brussels: European Union [Online]. Available:
http://ec.europa.eu/clima/publications/docs/eu_climate_
policy_explained_en.pdf
D. Helm, The Carbon Crunch; How We're Getting Climate Change Wrong: and How to Fix It. New Haven, CT:
Yale Univ. Press, 2012.

january/february 2017

M. O. Bettzüge, D. Helm, and F. Roques. (2014). The crisis of the European electricity system: Diagnosis and possible ways forward. Commissariat general à la stratégie et à la
prospective, Paris [Online]. Available: http://www.strategie
.gouv.fr/sites/strategie.gouv.fr/files/archives/CGSP_Report_
European_Electricity_System_030220141.pdf
International Energy Agency. (2016). Re-powering markets:
Msarket design and regulation during the transition to lowcarbon power systems. IEA/OECD, Paris [Online]. Available:
http://www.iea.org/publications/freepublications/publication/
re-powering-markets-market-design-and-regulation-duringthe-transition-to-low-carbon-power-systems.html
Energy Information Agency. (Feb. 7, 2014). High prices
how stresses in New England natural gas delivery system
[Online]. Available: https://www.eia.gov/naturalgas/review/
deliverysystem/2013/pdf/newengland_natgas.pdf
J. L. Sweeney, The California Electricity Crisis. Stanford, CA: Hoover, 2002.
P. L. Joskow. (2001). California's electricity crisis. Oxford Rev. Econ. Policy [Online]. vol. 17, no. 3, pp. 365-388.
Available: http://economics.mit.edu/files/1149
California ISO. What the duck curve tells us about
managing a green grid, Fast Facts, version CommPR/
2016. Available: https://www.caiso.com /Documents/
FlexibleResourcesHelpRenewables_FastFacts.pdf
J. Lazar. (Feb., 2016). Teaching the "Duck" to Fly (2nd
ed.). RAP. [Online]. Available: http://www.raponline.org/
wp-content/uploads/2016/05/rap-lazar-teachingtheduck22016-feb-2.pdf
P. Denholm, M. O'Connell, G. Brinkman, and J. Jorgenson. (2015). Overgeneration from Solar Energy in California: A Field Guide to the Duck Chart, NREL, Golden,
CO, Tech. Rep. NREL/TP-6A20-65023 [Online]. Available: http://www.nrel.gov/docs/fy16osti/65023.pdf
C. Kang, X. Chen, Q. Xu, D. Ren, Y. Huang, Q. Xia,
W. Wang, C. Jiang, J. Liang, J. Xin, X. Chen, B. Peng, K.
Men, Z. Chen, X. Jin, H. Li, and J. Huang, "Balance of
power: Toward a more environmentally friendly, efficient,
and effective integration of energy systems in China,"
IEEE Power Energy Mag., vol. 11, no. 5, pp. 56-64, Sept./
Oct. 2013.

Biographies
William D'haeseleer is with the University of Leuven (KU
Leuven), Belgium.
Laurens de Vries is with the Delft University of Technology,
The Netherlands.
Chongqing Kang is with Tsinghua University, Beijing
China.
Erik Delarue is with the University of Leuven (KU Leuven),
Belgium.
p&e

ieee power & energy magazine

http://www.strategie http://www.gouv.fr/sites/strategie.gouv.fr/files/archives/CGSP_Report_ http://www.iea.org/publications/freepublications/publication/ https://www.eia.gov/naturalgas/review/ http://economics.mit.edu/files/1149 https://www.caiso.com/Documents/ http://www.raponline.org/ http://www.nrel.gov/docs/fy16osti/65023.pdf http://ec.europa.eu/clima/publications/docs/eu_climate_

Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - January/February 2017