Advancing a Regional Power Market for Cleaner, More Reliable, and Affordable Energy
“A regional power market would mean that our utilities could more cost-effectively and reliably integrate larger amounts of renewable energy onto our electric grid in the West.”
– Jennifer Gardner, Staff Attorney
How we power our homes and businesses is changing rapidly. Driven by increased demand for cleaner energy and the rapidly declining cost of renewable energy, the electricity sector is undergoing a rapid transition away from the conventional fossil fuel-based resources of the past. The formation of a regional power market is an essential tool to meet the challenges of the future by delivering clean, reliable and affordable electricity to power our homes and businesses.
A Regional Power Market Increases the Use of Clean Renewable Energy
Renewable resources like wind and solar provide clean, emissions-free, lowcost power. However, because these resources are variable by nature— i.e., each generator can provide power only when the wind is blowing and the sun is shining locally—to ensure sufficient power is available when needed, other generating resources such as natural gas-fired power plants must be available to fill in the gaps. The larger geographic footprint of a regional market facilitates the reliable delivery of renewable energy. The sun is usually shining and the wind blowing somewhere in the West, even if not locally. For example, the sun comes up early in New Mexico and sets late in Washington State. The wind blows strongly most of the night in the Columbia Gorge and falls off just as the sun rises in solar rich states. And in Wyoming, the wind just blows. A regional market matches these sources of power with demand from our homes and businesses, enabling participating utilities to take advantage of distant as well as local renewable energy.
A Regional Power Market Improves Efficiency, Lowers Costs, and Promotes Economic Growth
A regional power market efficiently deploys the lowest-cost energy from across the region to meet the needs of an expanded geographic footprint, thereby lowering costs. And, through lower energy prices, a regional market can spur economic growth. Lower electricity prices translate into greater household income, and more income to spend can stimulate local economies. Furthermore, areas of the West that are rich in renewable resources receive the additional economic stimulus from the construction and maintenance of new renewable generation.
The existing electricity distribution grid is old, out of date, and unable to meet the challenges of the 21st century. The current distribution grid impedes deployment of key technologies that could mitigate climate change, and is vulnerable to the impacts of disasters. In addition, the grid performs poorly with respect to energy efficiency, wasting energy with voltages that are higher than necessary and restricting the variety of energy-efficient appliances that customers can choose. Utilities do not have sufficient monitoring of the detailed status of the grid, and there is currently very little ability for self-healing such as automatic rerouting of electricity when certain sectors of the grid fail.
This lack of grid resiliency impacts communities at a fundamental level, as demonstrated by days and even weeks of electric outages that risk lives and bring communities to a standstill. For example, in New York City, Superstorm Sandy took out power for over a week due to flooding of the grid, and the 2011 Southwest Blackout impacted seven million people in Arizona, Southern California, and parts of Mexico.
A Regional Power Market Makes the Best Use of the West’s Transmission Grid, Reducing the Need for Expensive and Potentially Environmentally Disruptive New Transmission Lines
Currently, sellers of electricity in the West must enter into contracts to move power from one location to another over long distances. For example, a utility in Montana may have power to sell to a utility in San Diego. To move that power, the utility may contract with multiple transmission operators through Oregon and California. However, since electricity follows the laws of physics rather than the contract path, this electricity may actually flow south through Utah (rather than the contracted Oregon/California path), unexpectedly overloading and stressing that part of the grid. To protect against this type of overloading, the lines in Utah may routinely be operated well below their full capability.
By contrast, a regional market is operated by a grid operator using highly sophisticated software, monitors, and computers that allow it to see the way electricity actually flows. This allows the transmission system to be more fully utilized and reduces the need to build expensive new transmission. Making more efficient use of the existing grid not only saves money, but also avoids potential harm to recreation areas, habitat, endangered species, and iconic landscapes.
The transmission system in the West (also called the Western Interconnection) is one large integrated network that includes British Columbia and Alberta, Canada; all or parts of fourteen western states in the US; and the northern portion of Baja, Mexico (see Figure 1). Due to its interconnected nature, a glitch in any part of this large grid can lead to service interruptions hundreds of miles away. A regional power market would automate and significantly enhance the reliable delivery of power across the western grid.
In the West today, 38 separate entities, referred to as Balancing Authorities, match power generation to the demand from homes and businesses within their local areas (see Figure 2). Each has a relatively good understanding of its own operations, but the ability to view their neighbors’ transactions is limited. Traders buy and sell electricity in large blocks, and most trades are arranged manually—by email or telephone. When an event occurs that poses a threat to the larger grid, such as the loss of a large generator or transmission line, the entity with the legal responsibility to assure reliability in that local area must locate additional power and available transmission. This can be time consuming, and deteriorating conditions on an interconnected grid can cause blackouts that can spread to neighboring utilities’ systems.
A regional power market can improve reliability. By using sophisticated software, monitors, and other equipment, the regional power market’s grid operator can view generation levels, power flows, and resource availability across the entire expanded footprint. In industry parlance, this is called “situational awareness.” If a large unit or transmission line is lost, the system software swiftly and automatically re-deploys available generation using available transmission, reducing the risk of blackouts. Strengthening the reliable operation of the electricity grid is good for consumers.
It’s Time for the West to Gain the Advantages of a Regional Power Market
- Create electric vehicle charging rates and programs that advance electric vehicles using renewable, clean energy while reducing peak loads to the electricity distribution grid system. Encouraging electric vehicles to become more numerous improves our air quality and helps slow climate change, as long as this increased demand on electricity is generated from clean renewable sources wherever possible. Utilities will become engaged as active advocates for electrification of transportation – and they need to offer charging rates and programs that encourage charging during non-peak hours. Planning for how, where, and when charging will occur will go a long way toward keeping our electric grid resilient.
- Ensure all distributed solar generation systems are equipped with smart inverters to address over-voltage. Solar panels need inverters to convert direct current to the alternating current that powers our homes and businesses. High concentrations of solar panels in a small geographic area can cause voltages that are over the limit of safe operation. Smart inverters can manage grid impacts such as these potentially high voltages, removing a technical barrier that could limit the spread of private rooftop solar. States should create clear, fair rules governing smart inverter interconnection to the grid.
- Develop and promote battery storage to address intermittent distributed clean energy resources such as rooftop solar and reduce peak loads on the grid. States need to develop clear, fair rules governing interconnection and control of energy storage resources, as well as compensation for the services they provide. The price of battery storage is falling and will eventually become an excellent way of making solar and wind generation useful during all times of the day. States have a valuable role to play in advancing this needed storage resource.
- Upgrade utilities’ communication infrastructure to allow for increasing levels of energy efficiency. Utilities historically have not monitored the performance of their distribution grids, much less communicated that performance to customers. This needs to change. With a smarter grid, smart thermostats, and smart appliances we can do a much better job of managing and reducing our energy use. To do this, utilities need to invest in robust communication networks that allow data flow between the customer and the utility in real time.
- Reduce energy waste in the electricity distribution grid itself by investing in voltage optimization. Our electric appliances and equipment often get higher voltages delivered to them than they need. This causes a significant waste of energy. With regulatory approval, utilities should invest in and install equipment that will adaptively control voltages to lower, more efficient ranges that save energy and are better for our equipment. As a result, overall energy use can decrease by approximately 2%.
- Optimize the distribution grid for resiliency and reliability. Utilities need to invest in advanced grid monitoring equipment so they know exactly when and where outages occur. The second step to improve grid reliability is for the utilities to invest in self-healing technologies that instantaneously reconfigure the grid during an outage so customers will experience fewer and shorter outages each year. This will also benefit communities with quicker recovery from disasters such as flooding or fires.
Western Resource Advocates Plays a Critical Role in Securing Grid Improvements
Western Resource Advocates is working with utilities and regulators to develop open, public processes for creating electricity distribution grid improvement plans and to incentivize investments in the grid. Working in regulatory arenas in Arizona, Colorado, Nevada, New Mexico, and Utah, we seek meaningful improvements in the electricity transmission grid and its regulations in order to facilitate innovations necessary to address climate change.
Electric Distribution Grid and Transmission