| Summary: | This thesis describes the comparative analysis conducted to understand the similarities and differences between the California and Texas electricity markets from a regulatory standpoint. Each market has adopted unique policies to kickstart its green energy transition. While both regions have seen a predominant renewable penetration, they have also started to experience hurdles in their grid operations due to the inherent intermittent nature of renewables.
The comparative analysis was carried out through a flexibility model to reflect the uncertainty that exists in each market over time. The development of renewable electricity markets are highly dynamic in nature, so the period under analysis for the investment at hand was separated into three phases to reflect the effects renewable penetration has on the grid and to show how those effects have been and could be handled by the Texas and California grid operators.
The comparison provides a recommendation for investors trying to deploy capital into a 50 MW solar PV, renewable asset, under development with a 30-year useful life segregated into each phase. The critical metric for steering that recommendation is based on the net present values of the cashflows from the projects in each location. These cashflows directly reflect the policies in each market, given the power price evolution. The economics behind renewables operating in electricity markets follow three distinct phases. At first, renewables expect high margins from high market prices, followed by a decrease in power prices from their penetration. In the final phase, their intermittent nature creates a need for new capacity. Therefore, the long-term value of investments is risky and requires careful analysis that reflects the highly dynamic and uncertain nature of power markets.
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