An issue that is closely linked to markets and prices is that of planning and physical capacity addition plans. The link exists in theory because liberalized markets were fundamentally designed to deliver the least cost plan (in the long term) and dispatch (in the short term). As far as clean energy transition goes, however, this link has been tenuous in reality at best. Least-cost plans routinely predicted a volume of competitive entry of renewables that did not eventuate or at least required a policy vehicle, often with subsidies, and hence cannot be termed as ‘market led’. Plans have been meticulously prepared for the next 20-30 years that show systems could be decarbonized at reasonable costs while ensuring resource adequacy and system security. Markets, in reality, even with a healthy allowance for the difference between theory and practice, have not yielded these plans. Several systems, including advanced systems in the United States, Europe, and Australia, encountered system security and inadequacy issues even with far lower realization of variable renewables than planned. The situation is far worse in developing countries, where a wholesale market's absence or poor functioning has made it difficult for renewables to enter the market, even if there is a clear economic case. Although countries like China and India are bright exceptions, with 600 GW and 100 GW of variable RE additions over the past decade, respectively – there are two significant issues, namely: (a) almost all of this capacity has come about through dedicated policy initiatives rather than a market-driven competitive entry; and (b) the presence of legacy coal supply and generation contracts, and the absence of a (liquid) market has led to the continuation of inefficient coal units even if their utilization in both countries has steadily declined over the years. This, in turn, has led to less than the optimal level of RE entry. India, for instance, fell well short of its 175 GW RE target in 2022.<sup>2</sup> There is also inefficient overuse of coal coupled with underutilization of RE, including significant rejection of solar and wind in China (Zhang et al., 2016).

It is fair to say that the interface between least-cost planning and market outcomes for alternative market design is not very clear. At the very least, very few decarbonization studies have been accompanied by a credible market analysis to suggest _the_ plan can be delivered through a market. As long-term planning exercises have typically been carried out using commonly utilized optimization models, there is a potential for increased exploitation of similar types of decision-support tools designed specifically for the assessment of wholesale markets. Such tools, if appropriately calibrated and parameterized, could provide a robust and quick evaluation of proposed market designs, including price formations, dispatches, and strategic investment decisions. In fact, a wide range of market models have been proposed over the last 20 years, but these have not been utilized well for long-term planning and policy analysis . This is an area where significantly more work is needed to bring planning and market outcomes in alignment to better understand why these outcomes often diverge and design market mechanism to reduce the gap. As (Conejo & Ruiz, 2020) discusses that the appropriate representation of the decisions of all market agents, which is beyond the purview of conventional optimization approach and is most appropriately represented through equilibrium models – an issue we discuss at length in a later section of this paper. As many developing countries embark on wholesale market developments together with renewable policies, analytical exploration of these markets is a critical need to ensure markets can deliver the desired clean generation portfolio and lower cost. It is worth recollecting that RE portfolio standards have often been met at a substantially higher impact on tariffs than was envisaged in least-cost plans. Worse – even if only a fraction of the “least cost” renewable energy is added to the system – retail prices faced by customers have increased. Indeed some of the cleanest generation systems in the world,

> 2 As of July 2022, “ _only around 57% of the 100GW solar target and 67% of the wind target has been met. This means India is projected to miss its 2022 solar and wind capacity targets by about 27% and 18%, respectively._ ” Please refer to: https://www.weforum.org/agenda/2022/07/india-investment-renewables-green-energy/.

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