... FERC decision holds back clean energy competition in the Southeast | Solar Builder
 

FERC decision holds back clean energy competition in the Southeast

southeast united states

The Southeast does not have a regional competitive electricity wholesale market that functions apart from the vertically integrated utilities, and a recent FERC ruling solidified this structure.

Several utilities in the Southeast, including Southern Co., Duke Energy, and the Tennessee Valley Authority, filed with FERC in February to form a new platform for power trading called the Southeast Energy Exchange Market (SEEM), which clean energy advocates see as a preemptive move to avoid real competition. FERC came out with a 2-2 split ruling this week, which not only OKs the formation of SEEM, but allows it to happen without any commission direction for how the new platform should be implemented.

A national energy coalition including Advanced Energy Economy (AEE), Advanced Energy Buyers Group (AEBG), and Renewable Energy Buyers Alliance (REBA) is outspoken about how this ruling was a missed opportunity to ensure the Southeast electricity market opened up access to low-cost clean energy supplies and improved reliability and resilience. And as large corporate customers looking to competitive wholesale markets for access to advanced energy supplies, the region could miss out on new jobs and economic benefits.

“FERC missed an opportunity to ensure that SEEM is a stepping stone to a competitive wholesale electricity market that delivers substantial benefits to consumers,” said Jeff Dennis, Managing Director and General Counsel at Advanced Energy Economy (AEE). “Moreover, FERC appears to have passed on creating a forum to foster discussion with states and stakeholders regarding the future of wholesale power markets in the region. This result could allow utilities in the Southeast to lock in a subpar alternative that will not create meaningful savings for ratepayers and will do little to accelerate the adoption of advanced energy technologies, while allowing those utilities to cement their market dominance in the region.”

“Today’s decision limits the benefits customers in the Southeast would otherwise experience with true market reforms,” said Bryn Baker, Director of Policy at Renewable Energy Buyers Alliance (REBA). “While SEEM may create efficiencies in existing practices, REBA will continue to advocate for market options and engage with policymakers at the federal and state levels to advance the full scale of potential benefits found within organized wholesale markets.”

Background: Regional Transmission Organization or Independent System Operators (RTO/ISO) operate day-ahead and real-time (every five minutes) markets for the purchase and sale of wholesale electricity among multiple entities, independently administer access to the transmission system across multiple utility systems at a single rate, and allow for sharing of generation reserves and reliability services on a regional (as opposed to utility-by-utility) basis.

In the Southeast, each utility separately operates its own generating resources and transmission system, which leaves third-party energy generators at a disadvantage in terms of accessing transmission capacity and day-ahead /real-time energy markets. A recent report commissioned by the American Council on Renewable Energy showed an organized wholesale market in the Southeast would generate $119 billion in cumulative customer savings by 2040 compared to SEEM.

AEE analysis of SEEM proposal

  • The proposed SEEM platform would match bids to sell and offers to buy energy among the participating utilities, which would submit those bids on a voluntary basis when they have available generation or potential need for additional supply.
  • SEEM would match bids to sell and offers to buy and consummate transactions through an algorithm that, according to the sponsoring utilities, determines when such transactions will “maximize” total benefit for the trading interval in question.
  • The algorithm would, according to the filing, calculate prices based on a “split the savings” approach; under this approach, a $20/megawatt-hour bid and a $10/MWh offer would settle at $15/MWh (minus a discount for the cost of energy lost during transmission).
  • SEEM relies on a new transmission service that utilizes unused capacity; the purchaser must secure new service from each individual utility between the generation source and its load. There would be no charge for this transmission service, but it has the lowest priority and will be curtailed first in the event of congestion on the transmission system.
  • With few non-utility generators able to operate in the region today and no clear path for them to join SEEM, the end result of the process is this: if no utility is offering excess generation, no utility is seeking additional generation, and no transmission capacity is sitting idle, no deal – and no savings for customers, even if in a competitive market such opportunities would be revealed.

What to do next?

These national associations submitted joint comments earlier this year asking FERC to examine shortcomings in the SEEM proposal and specifically urged FERC to:

  1. Require the utilities to supplement their filing with additional implementation details that are necessary to determine whether SEEM is just and reasonable;
  2. Consider modifications to the proposed SEEM design that enhance market and stakeholder protections; and
  3. Initiate a joint conference with state regulators and energy officials to convene broader discussions on the future of wholesale markets and transmission integration in the Southeast.

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