A report by the American Council on Renewable Energy (ACORE), titled “Energy Market Design and the Southeast United States,” proves that renewable energy advocates are unified on the benefits of competitive markets with real-time pricing signals. The benefits – consumer savings, effective integration of renewable energy and environmental well-being – trump the antiquated SEEM proposal which upholds the vertically integrated monopoly utility model.
With the SEEM proposal, utilities have devised a plan to shore up control and block competition from the region. The proposal’s faults are numerous, including (a) providing voting power to utilities and control of the program to the largest utilities, (b) giving utilities the ability to hire and fire their own “market auditor,” and (c) projecting less than $50 million in savings, as opposed to the billions projected under an RTO/ISO proposal.
Learn more about why real-time pricing signals are better for consumers, energy efficiency and the environment below or at this link.
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“Real-time markets benefit consumers through cost savings on their electric bills, accommodating consumer preferences for cleaner resources, allowing the participation of new technologies and maintaining electric reliability.
Consumer Savings
Real-time markets benefit from competition as the driving force of construction and use of least-cost resources. As price signals govern generator investment and dispatch decisions, the grid’s resource mix will continue to change as the lower-cost resources clear auctions to bid another day while more expensive resources retire. Real-world experience across the RTO/ISOs has demonstrated the benefits of this competition.
The ISO-NE 2020 Regional Electricity Outlook, noting that less costly resources have displaced more costly ones, reported, “After plummeting almost 50% a decade ago, average wholesale energy prices have remained consistently low since then.” Similarly, a survey from Duke University’s Nicholas Institute for Environmental Policy Solutions of RTOs’ self-reported consumer savings in comparison to non-market scenarios found that “PJM estimates that its services produce annual savings of $3.2– $4 billion...MISO estimates that its services produced savings in 2019 of $3.2–$4 billion compared to standard industry practice without an RTO…[and]…SPP estimates that for 2018, its services provided $2.2 billion in annual net benefits with a benefit-to-cost ratio of 14:1.” MISO’s latest 2020 value proposition study identified $3.1-$3.9 billion in annual regional benefits, continuing the trend. CAISO estimates over $1.18 billion in similar benefits in the Western EIM since 2014. When electrons move across a utility footprint, the transmitting utility adds a charge for the service. When those electrons flow to an additional utility, that additional utility adds its own charge. These charges stack and can thus raise consumer costs significantly above the actual cost of providing service through a practice known as “rate pancaking.” Real-time markets such as RTO/ISOs and EIMs eliminate the imposition of multiple transmission charges for one transaction, solving the rate pancaking problem.
Effective Integration of Renewable Energy
Real-time markets have reliably and cost-effectively integrated well over 100 gigawatts of renewable energy since their inception over 20 years ago. While renewables have seen growing deployment in both market and non-market regions, wind and solar resources have been disproportionately deployed in RTO areas relative to non-RTO areas. Larger markets allow diverse resources to complement each other, supporting reliability and also enabling higher levels of renewable energy. Improvements in technology, state renewable energy standards and economies of scale from market access have helped lower the levelized cost of electricity from onshore wind by approximately 70% and photovoltaic solar by approximately 90% over the past decade. Former FERC Commissioner Bill Massey, whose service at the Commission spanned the pivotal market-forming time of the late 1990s and early 2000s, said succinctly: “Organized regional markets are one of the surest and lowest cost paths to achieving a clean energy future in the U.S. They have the large geographic scope, encompassing an entire state or several states, to handle the variability of renewable resources such as wind and solar, and because clean energy is increasingly the lowest-cost option, it tends to compete effectively in these markets.”
A comparison of the likely future of renewable energy integration by grid region also provides a stark contrast. Over the past half decade, proposed natural gas generating capacity has declined across most of the country while proposed renewable generating capacity has dramatically accelerated past proposed fossil additions. The Southeast, one of only two non-real-time market regions in the continental U.S., has bucked this trend with a record of nearly 40 GW of natural gas capacity waiting in grid interconnection queues as of 2020. Similarly, an April 2021 survey of leading renewable energy project developers found the non-market Southeast to be the least attractive of the nine grid regions in the continental U.S. for project development. The top three most attractive regions for renewable development were the market regions of PJM, CAISO and NYISO, respectively.
Environmental Benefits
By reducing curtailment of renewable energy resources, wholesale energy markets enable the grid to use renewable energy more efficiently. Reduced renewable curtailment results in less frequent operation of older, more polluting resources. As a result, reduced curtailment typically enables a less-polluting grid with fewer greenhouse gas emissions. While other factors may also contribute, carbon dioxide emissions have fallen five percentage points more from a 2013 baseline in market regions than in non-market regions. The Western EIM’s incremental embrace of market benefits has already resulted in reduced renewable energy curtailment and yielded 586,553 equivalent tons of carbon dioxide reduction since 2015. Emissions within market regions should keep falling as markets continue to assist in the integration of emission-free, renewable energy resources and the retirement of uneconomic emitting resources. Wind and solar energy are now often the least-cost new resources, further assisting this trend.”