AEE Launches Policy Briefs on Wholesale Markets

First two in series provide overviews on how wholesale markets work and the barriers that keep advanced energy technologies from competing

WASHINGTON, D.C., October 9, 2019 – Today, national business group Advanced Energy Economy released the first two policy briefs in a new series on how advanced energy technologies can and should be allowed to participate in wholesale electricity markets, for the benefit of customers and the grid itself. These two briefs, along with additional wholesale market briefs as they are developed, can be downloaded here. 

Wholesale electricity markets – seven state and regional markets overseen by the Federal Energy Regulatory Commission (FERC), plus the independent Electric Reliability Council of Texas (ERCOT) – currently serve more than 200 million Americans and account for about two-thirds of all electricity sales. These critical markets are complex, governed by rules that either facilitate or hinder participation by advanced energy technologies and services, with consequences for the competition in these markets that keeps reliability high and costs low. Removing barriers that stand in the way of full market participation by advanced energy would be steps toward expanding the advanced energy market opportunity by an estimated $65 billion.  

To help policymakers understand how the barriers created by market rules stand in the way of advanced energy technologies, AEE’s is developing a series of two-page market briefs that provide clear and concise information on these markets and the way they affect advanced energy technologies and the companies that provide them.  . 

“Each FERC order or RTO/ISO decision impacts the over $120 billion in energy transactions that occur annually in wholesale markets and how advanced energy technologies can or cannot participate in those markets,” said Jeff Dennis, Managing Director and General Counsel at Advanced Energy Economy. “Many market rules today favor incumbent technologies and disadvantage newer and more innovative energy options. These market briefs are specifically designed to help educate policymakers on these issues so they can take action.” 

Today, AEE is releasing the first two market briefs in this series. The first, “Needed: A Level Playing Field in Wholesale Electricity Markets,” explains how the markets governed by FERC operate and why allowing all resources to compete on a technology-neutral basis will benefit consumers and the grid. The brief identifies three common barriers that generally stand in the way of all resources competing on price and performance:

1. Requirements that all energy resources have characteristics (such as size, operating time, or onsite fuel) that match the characteristics of older power plants;
   
   
2. Categorizing resources based on what they are (such as a power plant) rather than what they can do (such as produce, store, or save electricity); and
   
   
3. Prioritizing supply-side resources (such as power plants) over demand-side resources (such as efficiency). 

The brief also cites recent steps by FERC to create a level playing field in these markets. 

The second brief, “Market Barriers Prevent Advanced Energy from Competing,” notes that advanced energy is a $238 billion industry in the United States, supporting 3.5 million employees, and is now the lowest-cost resources in many markets, but that rules in some markets stand in the way of these technologies. Specifically: 

1. Existing rules either hinder or prevent distributed energy resources (DER) from participating in wholesale markets;
   
   
2. Current regulations and proposed market rule changes favor investment in large-scale fossil-fuel generation over more-affordable renewable energy and energy efficiency resources;
   
   
3. Failures in transmission planning, especially interregional planning processes, prevent transmission buildout adequate to unlock the full benefits of renewable energy;
   
   
4. Some market rules specifically prohibit wind and solar from providing certain grid services even though these resources perform on a comparable basis to traditional power plants. 

This brief also gives three examples of market barriers being removed and points to the way one remaining barrier could quickly be taken down: FERC taking action to finalize a rulemaking begun nearly three years ago to accommodate the participation of aggregated DER in the wholesale markets under its jurisdiction. 

Since 2016, AEE has worked on expanding wholesale markets to help accelerate the growth of advanced energy. Experience shows that advanced energy technologies can compete with traditional resources and can change the power grid for the better – if they are allowed to compete. 

“Congress, in particular, has a unique role in removing market barriers for advanced energy. These market briefs are intended to educate policymakers on the issues facing advanced energy technologies, and we encourage Congress and other policymakers to work with the industry to allow them to compete to deliver benefits to consumers, the economy and environment,” said Dennis. 

Background Resources:

• AEE’s Wholesale Market Barriers to Advanced Energy — and How to Remove Them (features 21 case studies) is here.
• What Distributed Energy Resources Could Bring to Wholesale Markets — If They Are Given a Chance (summary of white paper with five project case studies) is here.

About Advanced Energy Economy:
Advanced Energy Economy (AEE) is a national association of businesses that are making the energy we use secure, clean, and affordable. Advanced energy encompasses a broad range of products and services that constitute the best available technologies for meeting energy needs today and tomorrow. AEE’s mission is to transform public policy to enable rapid growth of advanced energy businesses. Engaged at the federal level and in more than a dozen states around the country, AEE represents more than 100 companies in the $238 billion U.S. advanced energy industry, which employs 3.5 million U.S. workers. Learn more at www.aee.net, track the latest news @AEEnet.