Recently there has been some coverage and conversations about regional energy markets and their potential impacts in the West. For a variety of reasons (which I’ll elaborate on in a future blog post), some support these markets and some do not. For its part, Western Resource Advocates is a strong supporter of regional energy markets because they enable the West’s electric grid to take advantage of more renewable energy, while also improving reliability of the grid. This means that when you go to turn the lights on in your home, you can feel secure knowing that the lights will, in fact, come on—and that renewable energy will be playing more of a role in providing the electricity to make that possible. But, before we can really dive into the benefits of regional energy markets, we first need to understand what they are and why they’re an improvement to business as usual.
Today in the West, we have a LOT of utilities. And these utilities are required to keep the supply and demand for electric power in constant balance – this ensures reliability and reduces the chance of blackouts. Because we have a lot of utilities (and a lot of land), some time ago, the utilities decided to organize into a bit of a wonky structure. The result? Thirty-eight “Balancing Authorities” (or BAs) that balance electricity supply and demand within their respective geographic footprints. To help you visualize this, I’ve included a BA map from our friends at the Western Electricity Coordinating Council.
Carl Zichella, my colleague at Natural Resources Defense Council (NRDC), has likened this operating structure to 38 different drivers operating the same bus on the highway (https://www.nrdc.org/experts/carl-zichella/regional-coordination-and-markets-key-renewable-energy-future). And we’re not talking about one driver and 37 “backseat” drivers (oh, the horror!), but actually 38 separate drivers trying to take the same vehicle to the same destination – in this case, we’ll call the destination Reliability, USA (i.e., they’re all trying to provide affordable power to their customers in a way that doesn’t result in blackouts). It doesn’t sound very efficient does it? Well, you’re right, it’s not!
So, let’s take that same bus and change the scenario a bit. Now we have one driver with 37 passengers (no backseat drivers). That adds up to 38 entities total, but with just one guy or gal driving the bus to our favorite town: Reliability. In this case, the single driver is the market operator and the 37 passengers are the BAs who are now all working together. Doesn’t this scenario sound far more efficient than the first scenario? Well, it is! And it’s this scenario that we’re trying to get to in the West – a scenario in which these 38 Balancing Authorities can get together and cooperate across a shared footprint. Basically, we’re taking that map from earlier and removing all of those pesky boundaries, which leads us to basically one giant BA or regional energy market in the West. I’m hoping some smart folks will come up with a good visual soon to depict this western regional energy market, but for right now, you’ll just have to use your imagination.
When these 38 BAs combine and become one, amazing things can happen. (Yes, I know that sounds like a cheesy love song.) These entities can now share resources (including renewables!) and transmission on a scale that would have been impossible before. And this means our utilities can more cost-effectively and reliably integrate larger amounts of renewable energy onto our electric grid in the West. This is a very good thing. It not only reduces our chances of blackouts, it also means we will need less and less fossil fuels—and that’s why a regional energy market will pave the way for a clean energy future in the West.
In my next blog post, I’ll take a stab at explaining the benefits of a regional energy market in more detail and discussing why, even with these benefits, some in the industry still remain skeptical. And for those of you who really stay on top of your energy news (or just like to geek out), another future blog post will highlight the differences between this future regional energy market and the currently operating Energy Imbalance Market, or EIM.