Southeastern utilities including Duke Energy, Dominion and Southern Company unveiled plans to create the region’s first market for trading electricity across interstate transmission lines, a move that could lead to lower wholesale energy costs as similar markets have done in other parts of the country.
Clean energy groups warned, however, that any new regional power market must be organized in a transparent way to avoid undermining state-by-state efforts to boost clean power and reduce dependence on carbon-emitting power plants.
The plan to create a voluntary 15-minute energy market comes after months of discussions between investor-owned utilities, the Tennessee Valley Authority, and many of the region’s larger municipal utilities and rural electric cooperatives.
Kendal Bowman, Duke’s vice president for regulatory affairs, revealed the plan in a Monday meeting with groups involved in North Carolina’s Executive Order 80, passed by Gov. Roy Cooper in 2018 to design an energy and climate change plan for the state. The Charlotte Business Journal first reported on the plan on Tuesday.
The goal would be to augment the Southeast’s existing system of bilateral energy exchanges across utility-owned transmission networks with a “centralized, region-wide, automated intra-hour energy exchange,” Southern Company spokesman Schuyler James Baehman wrote in an email.
While it’s still in an “exploratory stage,” participants are prepared to “take the appropriate steps to describe that more fully for regulators and stakeholders,” including filings with the Federal Energy Regulatory Commission.
First step toward an interstate transmission market
The Southeast and Western U.S. are outliers in lacking an organized transmission market, such as those operated by regional transmission organizations (RTOs) and independent system operators (ISOs) that manage the interstate transmission grids that provide electricity serving roughly two-thirds of the country.
The Southeast plan does not include creating an RTO or ISO, Duke Energy spokeswoman Erin Culbert wrote in an email. Neither would it preclude utilities from pursuing that option in the future — something that’s being suggested for study in bills in North and South Carolina’s state legislatures.
Instead, the new plan would create a market open to utilities that volunteer to participate in 15-minute trades of energy above and beyond the bilateral transactions that manage the exchange of electricity from one utility’s transmission system to another.
That’s similar to the Western Energy Imbalance Market (EIM) operated by California grid operator CAISO, which now includes nine utilities outside of the state. Since its launch in 2014, the EIM has led to an estimated $920 million in benefits for participating utilities, by allowing them to correct for gaps between exchanges organized via day or hour-ahead agreements and fluctuating real-time energy demands. Eight more Western U.S. utilities and the federal Bonneville Power Administration are planning to join the EIM by 2022.
Duke’s Culbert said that the plan being discussed for the Southeast “would share the same principles as an EIM to assist with imbalances and reduce energy costs,” but would not be “as granular or costly to set up as an EIM like the Western EIM.”
Grid imbalances have grown more challenging to manage with the growth of intermittent wind and solar power as a significant contributor to day-to-day electricity supplies, EIM advocates have noted. While the Southeast lags well behind the West in renewable energy, a combination of economics and state policies are driving renewable growth in states from the Carolinas and Florida to Tennessee and Georgia.
In the Southeast, “we’re eager to see the kind of benefits a regional energy market might have for our customers, particularly if it helps improve how we can jointly operate growing solar resources on our systems,” Culbert said.
Duke Energy’s utilities in the Carolinas and Florida, Southern Company’s utilities in Georgia and Alabama, Dominion’s South Carolina utility Scana and TVA are collectively building gigawatts of renewables that could be well served by a market to balance their output, while avoiding the need for gas-fired peaker plants to make up for shortfalls.
Clean energy groups challenge lack of transparency
Despite the potential benefits for renewables, the new plan was received critically by clean energy groups, independent power producers and consumer advocates who weren’t aware it was being contemplated until now.
“They’ve been apparently huddling behind closed doors to discuss this,” Frank Rambo, senior attorney and clean energy and air program leader for the Southern Environmental Law Center, said in a Tuesday interview. While energy imbalance markets have brought benefits to the Western U.S., “the way this has been handled so far is one of the reasons we’re very hesitant to embrace this idea for the South.”
Drew Elliot, the senior government affairs liaison for North Carolina municipal utility ElectriCities, told the Charlotte Business Journal that it and other participating utilities were barred from publicly discussing the plan under non-disclosure agreements.
Rambo noted that the region’s utilities have a track record of projects that have led to massive cost overruns while failing to realize promised customer and clean energy benefits, including Southern Company’s failed Kemper coal carbon capture project in Mississippi, the over-budget Vogtle nuclear power plant project in South Carolina, and the recently canceled Atlantic Coast Pipeline project between Duke and Dominion.
“Deciding things on their own and just saying ‘trust us’ is not something that we’re going to embrace,” Rambo said.
Rambo highlighted the lack of details on how the market would be structured, whether it would be organized by an existing or newly created entity, and to what extent it would bring the operations of utilities in the states it would cover under federal regulatory authority.
Duke’s Culbert said that such details, as well as projections of the market’s economic benefits, are being developed. “We expect to have more details on costs/benefits to share with stakeholders and regulators in the coming weeks and will welcome their feedback as we determine if this makes sense to pursue,” she said.
Source: Greentech Media