About This Project

The core market failure is that intermittent renewable generators impose balancing costs on grid operators but are not required to internalize them. A Capacity Obligation with Revenue Recycling mechanism resolves this by requiring renewable generators above a threshold to either procure their own balancing resources or pay into a grid stability fund at a rate set by system operators based on actual balancing cost data. Fund revenue is recycled to ratepayers as a bill credit, making the mechanism progressive rather than regressive. Unlike existing capacity markets, it ties obligation directly to each generator's variability profile — a solar farm with predictable output pays less than a wind farm with poor demand correlation. This creates investment incentives for co-located storage since batteries reduce obligation costs. California's Resource Adequacy program and UK's Contracts for Difference provide partial precedents but lack the revenue recycling component.

Timeline