arXiv subjects

Jacob Mays

Publications and source records attributed to Jacob Mays.

5 recordsLinked to original sources

arXiv2026

Capacity Markets for Large Loads under Supply-Chain Constraints

Motivated by the rapid growth of data centers, we develop a model to evaluate bringyour-own-capacity (BYOC) mandates and flexibility accreditation in capacity markets for new large loads with shared supply-chain constraints. With efficient pricing, BYOC mainly reallocates procurement between grid-built and self-built capacity and therefore has little welfare effect, while flexibility delivers a modest gain by reducing the effective capacity requirement. Under administrative price caps, mandates can improve static welfare by forcing data centers to internalize the full cost of capacity. The welfare ranking of the two instruments depends on supply-chain stress. At low or moderate stress, only the flexibility instrument raises welfare. Under severe stress with capped prices, the welfare gain from the BYOC obligation can exceed the gross flexibility benefit. The two instruments differ in their effects on a neighboring market: a unilateral BYOC mandate can crowd out its capacity investment, while flexibility produces essentially no spillover at our calibrated benchmark. Finally, applying current capacity non-performance penalties to flexible loads may lead to financial incentives that are too weak to induce truthful flexibility reporting.

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arXiv2026

Contracting for Long-Duration Energy Storage in Incomplete Risk Markets

Long-duration energy storage (LDES) is increasingly regarded as essential for reliability in decarbonized power systems. To encourage investment, policymakers introduce contracts, such as cap-and-floor schemes. So far, these schemes have only been evaluated using exogenous revenue or price distributions. This paper develops a two-stage stochastic equilibrium model to evaluate how LDES cap-and-floor design affects investment and market outcomes. This model endogenously captures the interactions among contract design, investment capacity, and cost of capital. Results for a stylized Great Britain case study show that market incompleteness substantially suppresses LDES investment. Centrally administered zero-premium contracts can restore the risk-neutral investment level by reducing downside risk, but doing so requires substantial expected transfers from consumers to investors and produces outcomes that are sensitive to the cap, floor, and sharing parameters. Bilaterally negotiated contracts largely eliminate expected transfers and reduce sensitivity to those parameters, but provide weaker investment incentives. To balance investment incentives, transfers, and social welfare, policymakers should jointly consider contract and institutional design.

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arXiv2026

Comparing Contract-Based Support Mechanisms for Long-Duration Energy Storage

Long-duration energy storage (LDES) faces significant revenue volatility that impedes investment. This paper evaluates four contract-based support mechanisms using an equilibrium model with risk-averse investors and incomplete risk markets. Applied to a stylized 2035 Great Britain case, we find that all mechanisms can achieve the targeted LDES capacity but differ substantially in cost-effectiveness and risk-aversion sensitivity. Contracts that eliminate revenue volatility achieve the lowest costs but may weaken operational incentives, while contracts that preserve market exposure maintain incentives at higher costs.

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arXiv2024

Transmission Benefits and Cost Allocation under Ambiguity

Disputes over cost allocation can present a significant barrier to investment in shared infrastructure. While it may be desirable to allocate cost in a way that corresponds to expected benefits, investments in long-lived projects are made under conditions of substantial uncertainty. In the context of electricity transmission, uncertainty combined with the inherent complexity of power systems analysis prevents the calculation of an estimated distribution of benefits that is agreeable to all participants. To analyze aspects of the cost allocation problem, we construct a model for transmission and generation expansion planning under uncertainty, enabling the identification of transmission investments as well as the calculation of benefits for users of the network. Numerical tests confirm the potential for realized benefits at the participant level to differ significantly from ex ante estimates. Based on the model and numerical tests we discuss several issues, including 1) establishing a valid counterfactual against which to measure benefits, 2) allocating cost to new and incumbent generators vs. solely allocating to loads, 3) calculating benefits at the portfolio vs. the individual project level, 4) identifying losers in a surplus-enhancing transmission expansion, and 5) quantifying the divergence between cost allocation decisions made ex ante and benefits realized ex post.

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arXiv2022

Beyond capacity: contractual form in electricity reliability obligations

Liberalized electricity markets often include resource adequacy mechanisms that require consumers to contract with generation resources well in advance of real-time operations. While administratively defined mechanisms have most commonly taken the form of a capacity obligation, efficient markets would feature a broad array of arrangements adapted to the risk profiles and appetites of market participants. This article considers how the financial hedge embedded in alternative resource adequacy contract designs can induce different responses from risk-averse investors, with consequences for the resource mix and market structure. We construct a stochastic equilibrium model describing a competitive market with incomplete risk trading and compute investment equilibria under different contracting regimes. Two policy recommendations result. First, to avoid creating inefficiency by crowding out other forms of risk sharing, system operators should allow resources contracted through other means to opt out of mandatory capacity mechanisms, with their contribution to those requirements subtracted from administratively defined demand curves. Second, if they wish to promote a single contractual form, regulators should consider replacing existing option-like capacity mechanisms with a shaped forward contract for energy. Beyond these recommendations, we discuss the tension that liberalized systems face in seeking to promote both reliability and competitive outcomes.

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