Southeast Energy Exchange Market (SEEM) is the latest effort by utilities in the southeast to organize themselves to realize cost savings with scale. Until now, an energy imbalance market from the west is a living market model for multi-state governance and market participation. None of the southeast or west models go as far as the regional transmission organizations in the east. A true energy market shows the locational price for transacting energy and sends locational signals for capacity. That is what renewable developers in the southeast need.
If renewable integration is the primary focus of the SEEM, then an ancillary services market needs to be established that co-optimizes an energy need with a frequency regulation need. There is no market for these services without transmission. Hence regional planning is needed to identify the network upgrades that give the most benefit for renewables.
SEEM is a good first step towards organized markets for renewables
Energy Imbalance Market (EIM) in the west is a work in progress that started in 2014. SEEM is a good first step for southeast utilities to coordinate in 2021. Transmission Owners (TOs) in the Midwest, power pool participants in New England and the Mid-Atlantic area took this step almost 20 years ago.
In the last two decades, what has changed is the energy transformation towards more fossil-free generation and more distributed energy resources. Part of the market improvements in well-established markets is due to the carbon-free nature of resources both on the supply and demand side.
Organized Markets in the eastern interconnection provide energy and capacity price transparency
The Regional Transmission Organizations (RTOs) in the eastern interconnection offer a perfect role model for SEEM and renewable energy interests. Why? Because there is a track record to show:
- emissions are down due to PJM’s market,
- annual value proposition studies document and benchmark each RTO’s value, and
- market reforms happen periodically as soon as challenges come up.
Another benefit is the state regulators’ continued engagement within states that have organized markets. Organization of MISO States (OMS), Organization of PJM States (OPSI), New England States Committee On Electricity (NESCOE) are prime examples of state regulators having a seat at the RTO table.
Perhaps the biggest benefit of participating in energy markets for RE developers is the price transparency around which locations and zones at an RTO command a higher capacity price versus the energy price arbitrage opportunities at transmission nodes. This price signaling is why we see more RE projects seeking to interconnect at PJM than MISO or SPP, for example.
Generator Interconnection Queue provides transparency and stability around interconnection procedures
A benefit from a true organized market is stakeholder governance. As soon as stakeholders raise a significant issue, RTOs respond with market reforms and workshops to bounce off ideas to solve the issue at hand. MISO and SPP went through a queue reform process, and PJM is following suit.
What is perhaps obvious in these RTOs and several states within the RTOs is that there is a common rule set that applies to all the renewable developers according to the size of the project (in MWs) they wish to interconnect. If anyone wishes to interconnect at a transmission substation in PJM, it is the same rule to connect in Ohio or Pennsylvania. We don’t know if this common set of interconnection rules is contemplated in the SEEM effort.
Transmission network upgrades alleviate the inevitable renewable curtailment pain
A benefit of RTOs is regional planning, which gives them the ability to look from a 50,000-foot level for transmission projects that meet multiple policy goals and address reliability and economic drivers. Individual RE developers in the southeast may be focused on their projects, as they should be. However, inevitably there would be a need for transmission upgrades that facilitate more renewable projects that cut across multiple states. Hence transmission planning is essential at the regional level, not the local level. Individual transmission owners don’t plan at that 50,000-foot level. They plan for their service territory.
Another issue that is not too far on the horizon is renewable energy curtailment. Without an energy and capacity market, there is no outlet for that excess southeast renewable energy. Even with a market to non-market coordination protocol, the market operator would prioritize native load (load inside the market) versus non-market load. Hence transmission is needed, and regional planning best addresses the need of renewable developers to reduce curtailments.
SEEM falls under the category of “something is better than nothing.” And that does not mean that renewable energy developers and advocates should settle for something less than an organized market. One way or the other, both utility-scale and distributed scale renewables would command a higher share of the energy mix in the future.
How quickly renewables proliferate in the southeast depends on the market design. And eastern RTOs provide a good role model for the southeast stakeholders.
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Source: Renewable Energy