Back in January, I suggested 2016 was the year for wholesale power market reform. So, was it? While shifts in these kinds of institutions take longer than one year, we’ve seen real progress on the four factors that made 2016 a turning point, and we believe progress will continue in 2017. America’s electricity mix continues to churn. During this period of transition, policymakers must pay particularly close attention to proposed wholesale power market changes.
Lower costs, enhanced capabilities, and an abundance of resources have set the United States and much of the world on track to increase renewable energy deployment and decrease carbon emissions from the energy sector. Still, the question of whether the U.S. can reliably and affordably integrate large amounts of wind and solar confronts policymakers – so we’re giving you four reasons 30% wind and solar is technically no big deal.
With future federal clean energy policies in doubt, proactive clean energy policy will likely be left largely to states in the next few years. Fortunately, a New York policy proposal could show the way forward on energy efficiency for utilities. Though energy efficiency is the most cost-effective clean energy resource in America, existing policies and programs still leave significant value on the table for residences and businesses. An outcome-oriented metric would focus on the policy goal of reduced energy use overall, putting a smaller emphasis on the administratively intensive business of attributing savings to specific actions.
Land-constrained Northeastern states looking for creative solutions to decarbonize their electricity systems and maintain affordable, reliable electricity service have renewed interest in an old resource – imported Canadian hydroelectricity. Getting pollution-free hydro from Canada means utilities must build new transmission lines on both sides of the border. Several projects underway across America, including a successful Minnesota model, show the Northeast how to overcome traditional siting challenges to access Canadian hydroelectric resources.
With such low wind and solar costs in Colorado, the question became: how can fossil plants that raise the cost of service to consumers be shut down or retired in favor of new wind and solar to support, rather than oppose the utility’s financial interests?
Like any corporation, investor-owned electric utilities have a duty to maximize shareholder profits. There’s no problem with this in principle – as long as what maximizes profits also maximizes benefits in the public interest, given utilities’ regulatory monopoly status. But today, how utilities make money must change to adapt to new grid needs, customer demands, and technological realities.
New York’s Reforming the Energy Vision (REV) initiative is transforming how utility stakeholders view the power sector’s future, but for the first time polling has revealed widespread support from consumers themselves. Evidence of strongly positive attitudes toward clean energy in general, and REV in particular, has major implications for utilities and regulators. Voters not only showed they care about global warming and climate change, but also support increasing renewable energy generation and expanding control over their own energy consumption – bolstering the case for bold regulatory reform to increase customer participation in grid management currently underway New York State.
Texas’ winter cold snaps and hot summer temperatures in 2011 triggered several years of debate on how best to guarantee long-term grid reliability, and decide whether to supplement Texas’ energy-only market with a forward capacity market. In 2014 Texas regulators decided against a standard forward capacity market for an energy-only market design with an operational reserve demand curve and a higher wholesale energy price cap of $9,000 per megawatt-hour (MWh). This decision has likely saved Texas consumers billions even as reliability improved, evidencing an energy transition driven by load reductions, significant increases in renewable generation, and cheap natural gas.
Utility regulation is getting harder. Before information technology’s rise combined with plummeting costs of energy efficiency and customer-sited generation, utilities had relatively few options for minimizing costs while achieving a balance of reliable, safe, and environmentally clean service. But distributed energy resources (DER) and better system awareness made possible by information technology have created massive new opportunities to optimize the system around these outcomes. If utilities are to serve as system optimizers, regulators must address the information asymmetry that strains cost-of-service prudency review to maximize the public interest.
Independent System Operators (ISO) like CAISO and PJM have empowered aggregators of distributed energy resources (DERs) to sell services into the transmission grid through market mechanisms recognizing their potential to create a more reliable, efficient, and clean grid. But since the flow of electrons between DERs and the transmission grid is mediated by distribution utilities, simply opening the door for DERs to join the party only goes so far – we still must identify and overcome challenges impeding progress at the interface between meters and transmission towers.