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Power systems with high wind penetration experience increased variability and uncertainty, such that determination of the required additional operating reserve is attracting a significant amount of attention and research. This paper presents methods used in recent wind integration analyses and operating practice, with key results that compare different methods or data. Wind integration analysis over the past several years has shown that wind variability need not be seen as a contingency event. The impact of wind will be seen in the reserves for non-event operation (normal operation dealing with deviations from schedules). Wind power will also result in some events of larger variability and large forecast errors that could be categorized as slow events. The level of operating reserve that is induced by wind is not constant during all hours of the year, so that dynamic allocation of reserves will reduce the amount of reserves needed in the system for most hours. The paper concludes with recent emerging trends.

Variable generation (VG) such as wind and photovoltaic solar power has increased substantially in recent years. VG has at least four unique characteristics compared to the traditional technologies that supply energy in the wholesale electricity markets. It increases the variability of net load (load minus VG) because its available power changes through time because of the changing source (i.e., wind speed or solar irradiance). VG also increases the uncertainty of the net load because the available power can be only partially predicted at all time horizons. Although it has significant fixed capital costs, VG has near-zero or zero variable production costs because of the free source of fuel. When production-based subsidies exist, this variable cost can be negative. Finally, VG has unique diurnal and seasonal patterns that make it primarily an energy resource. This is because periods of high-energy output may not correspond to times of high demand (or risk of insufficient generation) when considering the power system's resource adequacy requirements. These characteristics create unique challenges in planning and operating the power system, and they can also influence the performance and outcomes from electricity markets. At the same time, electricity market design must be robust enough to allow the market/system operator to make the most efficient use of the system, given the many constraints; thus, the market characteristics must be reflective of the physical nature of the power system. This report provides a comprehensive review of wholesale electricity markets and how the introduction of VG has impacted these markets. The report then focuses on two particular issues related to market design: revenue sufficiency for long-term reliability and incentivizing flexibility in short-term operations. Throughout the report, the authors provide an overview of current design and some designs that have been proposed by industry or researchers. Although certain market characteristics described in this report may point to advantages of specific market design elements, we avoid making specific recommendations in this report.