by Bob Shively, Enerdynamics President and Lead Facilitator
Last week’s Energy Currents article discussed how organized competitive markets run by an Independent System Operator (ISO) are winning out over less-competitive unorganized markets centered around vertically integrated utilities, bilateral trading, and transmission wheeling services. We looked at how organized markets have grown in North America over the last five years and how they are poised for even more growth in the near future.
So, continuing this discussion, why the movement to organized markets?
It is all about saving money and integrating renewables. The bigger the scheduling footprint, the easier it is to maintain adequate reserves and quickly respond to contingencies. And the bigger the footprint, the easier it is to access flexible resources to respond to too little or too much renewable generation in any specific region at a specific point in time.
Before organized markets, a system operator wanting to call on a resource in another region had to make a phone call and typically had to agree to take power from that resource for a minimum of two hours. Under the western EIM, the cheapest units are dispatched automatically for periods as short as five minutes. It is not hard to see the advantage. A study for the Mountain West Transmission Group suggested that in 2016 they could have saved $88 million in production costs by participating in a regional market. This graphic from the study indicates many of the benefits:
One final question: Will all of North America become an organized market?
The last key holdouts are certain regions of the U.S. Pacific Northwest dominated by Bonneville Power Administration (BPA), provincial utilities in Canada, and the southeast U.S. It is likely that the entities in the northwest will soon feel pressure to join the growing western organized markets, especially given the ongoing growth of renewables in the region.
Powerex, which covers the bulk of load in British Columbia, is already committed to the EIM, so most of western Canada will soon be tied to an organized market. So as far Canadian holdouts go, that leaves Sasketchewan and Manitoba, which historically had limited participation in cross-border trading; Quebec; and more isolated northeast provinces. With Quebec pushing for more transmission lines into ISO-NE, deeper integration may come in the future.
Meanwhile, it is perhaps the southeast U.S. that will take the longest to see benefits from joining an organized market. But within the decade, it appears likely that most, if not all, of North American will be part of organized wholesale electric markets. By then, we’ll be talking about organized markets on the distribution system!