The Southeastern United States, one of the country’s only regions without a competitive wholesale electricity market, is dominated by monopoly utilities, which have favored expensive and polluting fossil fuel generation over cheap clean energy. Nearly all Southeast coal plants cost more to run than replacing them with new wind and solar, so continuing to run these uneconomic resources forces customers to foot the bill and inhale dirty air.
Incremental progress may be on the horizon. Three regional utilities – Tennessee Valley Authority (a federal entity), Southern Company SCCO, and Duke Energy DUK
– have proposed the voluntary “Southeast Energy Exchange Market” (SEEM). But this modest proposal appears to extend rather than limit utilities’ power to retain expensive coal generation, ignoring billions in annual savings.
New research from Energy Innovation and Vibrant Clean Energy shows establishing a competitive wholesale electricity market across seven Southeastern states could save $384 billion and create more than 400,000 clean energy jobs, jump-starting an economy slowed by COVID-19 and dramatically reducing harmful air pollution.
North Carolina and South Carolina policymakers have the right idea by requiring regulators to investigate the benefits of establishing organized markets in these states.
Level playing field benefits buyers
Competitive wholesale electricity markets, or Regional Transmission Operators (RTOs) and Independent System Operators (ISOs), are public-benefit corporations serving 70% of U.S. electricity customers that arose from electricity restructuring during the late 1990s-early 2000s to cut costs and encourage innovation.
Competition in these markets has reduced wholesale energy costs while creating an entry point for low-cost renewable energy to provide power to the grid. They have also been critical to integrating variable renewable energy – wind and solar – and capitalizing on resource diversity over larger geographical areas.
These markets are far from perfect in practice, but have directly connected customers to least-cost renewable energy. “80% of contracts to add new renewables to the system by large energy buyers have been in organized competitive wholesale markets,” said Bryn Baker, Director of Policy Innovation at the Renewable Energy Buyers Alliance. “The level playing field that markets provide is critical to customers being able to access the clean and renewable power they need to meet their goals.”
But customers across the Southeast are still beholden to vertically-integrated utilities that own every aspect of electricity generation, transmission, and delivery. Despite ambitious long-term climate announcements, Southeast utilities are still heavily reliant on expensive-to-run coal plants and are doubling down on risky new gas infrastructure investments, instead of clean technologies of the future.
Billions of dollars in savings for customers
This modeling highlights how much seven Southeastern states (Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, and Tennessee) could gain from a competitive wholesale electricity market – and how much they could lose from business-as-usual.
Comparing a competitive regional Southeast market through 2040 to a business-as-usual scenario based on existing monopoly utility Integrated Resource Plans reveals remarkable findings. Introducing a Southeast regional competitive market that optimizes regional transmission and shares resources (key features of other RTOs) would save $384 billion dollars with approximately $17.4 billion average yearly savings through 2040 – 23% lower electricity costs compared to today.
These enormous savings come from cheaper wind, solar, and storage displacing more expensive-to-run coal, along with an RTO-led regional transmission planning scheme where all seven states share power resources and expand transmission to most efficiently meet regional electricity demand. VCE’s WIS:dom model also incorporates electricity distribution infrastructure savings from deploying distributed storage and solar resources.
In contrast, the current utility-led planning regime is an inefficient patchwork system. Monopoly utilities plan their electric grids independently from their neighbors and impose fees called “wheeling charges” to ship power across successive utility transmission systems. This incentivizes monopolies to over-build power plants, thereby increasing profits for their shareholders. Together, this significant duplication and overbuild of infrastructure costs customers billions.
Creating hundreds of thousands of high-wage jobs in clean energy
This buildout of wind, solar, and storage generates 285,000 new jobs in the Southeast through 2040 compared to business-as-usual – good jobs in one of the country’s fastest growing economic sectors, offering higher than average wages.
A competitive RTO would add 149 total gigawatts of clean energy resources in the Southeast including 62 GW of solar, 41 GW of wind, and 46 GW of battery storage. It also eliminates all coal generation by 2040. Increased battery storage and system flexibility also reduces the need for seldom-used gas peaking resources, which are mostly eliminated in the RTO by 2040. An online data explorer allows users to compare scenarios and understand state-level impacts:
By contrast, current utility plans add virtually no wind or storage, only 21 GW of additional solar by 2040, maintain existing coal, and drastically expand gas generation. By contrasting the two scenarios, the trade-off between maintaining these resources at the exclusion of clean energy becomes apparent: Consumers lose billions by propping up more expensive fossil resources.
While new jobs more than replace those lost in coal and gas, some communities will be disproportionately impacted by the transition. A companion policy report to the Southeast modeling highlights successful state policies smoothing the clean energy transition for coal-dependent communities in Colorado and New Mexico, which could be a valuable model for the Southeast.
Actual job growth may actually be even higher when factoring in better regional competitiveness. The analysis does not account for ripple effects of reduced electricity rates on consumer and business spending or the increased attractiveness of Southeastern states to the growing number of companies with 100% clean energy goals.
A region with some of America’s highest poverty rates, which may suffer more economic loss from COVID-19 than any other area of the country cannot afford to miss out on the economic stimulus that comes from simply introducing competition.
Major benefits for public health and the climate
Nationwide, Black Americans are exposed to 1.5 times as much PM 2.5 compared to white Americans. In Alabama, for example, people of color are exposed to roughly twice as much PM 2.5 pollution as white people. Transitioning away from dirty fossil fuels is not just a question of fair competition for clean energy power providers, it’s a matter of justice for communities disproportionately burdened by pollution.
Coal-fired power plants are major sources of toxic air pollution, so phasing out uneconomic coal dramatically improves air quality. Because every Southeastern coal-fired power plant is unable to compete in an open market scenario, PM 2.5 pollution – one of the most damaging pollutants for human health – drops to near zero by 2040 along with other harmful pollutants such as nitrogen oxides and sulphur oxides.
Closing the dirtiest sources of power and adding cheaper renewables would also reduce greenhouse gas emissions nearly 40% in the competitive RTO scenario compared to business-as-usual – important for a region that faces up to $60 billion each year in 2050 and up to $99 billion in 2090 in costs from climate-change induced sea level rise and storm surge.
Policymakers can unleash the power of competition
Recently, Duke and Southern confirmed they are considering a “centralized, region-wide, intra-hour energy exchange” called the Southeast Energy Exchange Market (SEEM). Without additional details, SEEM fails to address many of the efficiencies of full RTO integration modeled in this study like reserve sharing, transmission optimization, regional economic dispatch, independent system operation and market monitoring, and market access for independent power producers. It doesn’t even achieve the benefits of a true Energy Imbalance Market, such as the kind that serves the West including an independent operator, transparent pricing, or open transmission access.
While a fully restructured, organized market would take time to establish, the companion policy report recommends ways state legislatures and public utility commissions can introduce competitive behavior in advance of a traditional RTO/ISO. For example, all-source procurement, which requires monopoly utilities to conduct a competitive procurement process with robust bid evaluation, can add clean electricity and reduce customer costs.
Competition alone, however, will not achieve the rapid electricity sector decarbonization needed to avoid climate change’s worst impacts. A clean electricity standard would ensure aspirational goals set by utilities are realized, while market reform would help ensure this happens at least cost. Out of the seven states included in the model, only North Carolina has a meaningful renewable portfolio standard.
Aggressive customer cost savings, significant employment gains, and cleaner air – for the first time, research demonstrates how much a competitive regional electricity market would benefit the Southeast U.S. To deliver these benefits for the people they serve, policymakers and regulators should immediately ramp up efforts to bring competition to a region that has for too long been beholden to monopolies at the exclusion of low-cost clean energy.
via Forbes.com: Energy News https://ift.tt/3jdRlao