Advanced Energy Perspectives

Over the past two years, climate change has resurfaced as a top policy priority in Congress with policymakers from both parties offering ways to reduce carbon emissions. AEE has actively engaged in this conversation, testifying to Congress on how the country can achieve a 100% clean energy future in the power sector cost effectively. While many, including AEE, have focused on the need to establish a strong and enforceable target for meeting a 100% clean future, less attention has been paid to the ways wholesale electricity markets could drive toward this target, lowering consumers costs, expanding consumer access to clean energy, and reducing carbon emissions. That is, until now, as federal lawmakers are turning to expansion and improvement of wholesale markets as well as reducing barriers for advanced energy to access these markets as part of their plans.

Last August, thunderstorms in the United Kingdom triggered a loss of power generation that left 1.1 million consumers fumbling for a flashlight. As trains halted and traffic slowed, 475 MW of energy storage began discharging. A combination of batteries and other generators worked together to take 1 GW of demand off the system. In less than four minutes, grid frequency was returned to normal and power returned to customers. Blackouts are not particular to the UK. According to the U.S. Energy Information Administration, Americans lose approximately $150 billion to power outages each year. What’s less common is the use of advanced energy technologies like energy storage and distributed energy resources to increase reliability and keep the lights on. But that could change, if these technologies were allowed to compete in wholesale electricity markets on the basis of price and performance. Two new market briefs from AEE demonstrate why they should.

Two-thirds of the nation’s wholesale electricity sales occur in a competitive market managed by a Regional Transmission Organization (RTO) or Independent System Operator (ISO), with over 200 million customers in these areas and over $120 billion in annual energy transactions taking place. Under the Federal Power Act, these markets are overseen by the Federal Energy Regulatory Commission (FERC), which ultimately determines the rules for how wholesale electricity is bought and sold in the marketplace. RTOs/ISOs develop the market rules that dictate whether and how energy resources can participate and compete. Wholesale electricity markets should allow all resources to compete on price and performance, as the Federal Power Act requires that the rates, terms, and conditions of service governing wholesale competitive markets be “just and reasonable” and not grant any “undue preference or advantage.” Many market rules, however, are outdated, having been designed with older technologies in mind. Those rules can favor incumbent technologies and disadvantage newer and more innovative energy options – that is, advanced energy.