The Southwest Power Pool on Sept. 9 announced commitments by three regional utilities to join its Western Energy Imbalance Service Market as charter participants.
Tri-State Generation and Transmission Association of Westminster, Colorado; Basin Electric Power Cooperative of Bismarck, North Dakota; and three regions of the U.S. Department of Energy's Western Area Power Administration, based in Lakewood, Colorado, will begin participation in the real-time market when it launches in February 2021.
"It is clear the status quo cannot continue," an Aug. 27 memo from the managers of the three WAPA regions to WAPA Administrator and CEO Mark Gabriel said as they recommended WEIS participation.
"Ever-expanding deployment of intermittent, renewable resources and the retirement of coal-fired generation are creating operational issues that are difficult to manage in the [balancing authorities]," the memo says, adding that "drought conditions, environmental requirements and market trends are adding pressure to strained hydropower resources." The memo also addresses the loss of WAPA's bilateral trading partners as load-serving entities join organized markets.
The WEIS market marks another step forward for Little Rock, Arkansas-based SPP's Western expansion efforts that began with the announcement in June 2018 that it would begin providing reliability-coordination services to utilities in the Western Interconnection.
All of the new participants announced this week have customers in both the Western and Eastern interconnections and have signed on to receive SPP's reliability-coordination services, which will begin in December. Utilities that join the WEIS are not required to be members of SPP's regional transmission organization, which operates in the Eastern Interconnection, and participation will be on a contractual basis. Additional utilities might sign up by Oct. 25, after which SPP will integrate other new participants on a six-month cycle.
The overlap in RC customers is "not a coincidence," David Kelley, director of seams and market design for SPP, said in an interview. SPP is discussing potential WEIS participation with other RC customers, and running a market with the same entities for which SPP provides RC services creates efficiencies, Kelley said. Reliability coordination and EIM participation require the same data, which will enable SPP to leverage that data and information-technology connections to best meet load for the market systems. Kelley said market participation will also help utilities identify transmission congestion and facilitate effective expansion.
SPP ran an energy imbalance market for its RTO members in the Eastern Interconnection from 2007 to 2014. That effort evolved into the "Integrated Marketplace," which balances generation and load while also offering ancillary services to participants, Kelley said.
The three entities' presence in both the Eastern and Western interconnections will give them a geographical advantage. The utilities offer baseload coal, natural gas and hydroelectric resources along with an increasing portfolio of variable resources, particularly wind, which increases the appeal of an energy imbalance market by lowering costs, according to Kelley.
"We have the lowest wholesale energy prices in the East," Kelley said of SPP's RTO. "And that's directly correlated with all the wind resources." The price of wind is often at or near zero when investment tax credits are calculated into the price, he said.
The eastern portion of WAPA's Upper Great Plains region, with customers in Kansas and Nebraska on the Eastern Interconnection, has been a member of SPP's RTO since 2015. UGP's resources straddle the Eastern and Western interconnections, leaving the western part of the region unable to participate in a full-fledged RTO. WEIS enables the western portion of WAPA's UGP, along with its Rocky Mountain region and Colorado River Storage Project Management Center, to participate in a market without the requirement of full RTO membership, and made sense for the regions based on UGP's existing RTO membership and the regions' overlap, WAPA spokeswoman Lisa Meiman said in a telephone interview.
WAPA's Sierra Nevada region on Sept. 4 announced, along with the Balancing Authority of Northern California, that it would join the California Independent System Operator's Energy Imbalance Market. WAPA's remaining region, the Desert Southwest, over the coming year will study participation in an energy imbalance market before deciding whether to join CAISO's EIM or the SPP WEIS, according to Meiman.
In the memo, the regional managers said they agree with customer comments that "market participation requires entities to know that their host BA is participating, thus making WEIS an option for them. SPP's approach," they continue, "is to obtain a critical mass to ensure that the market will start, then provide additional time for entities to join the first group that begins market operations."
The utilities pointed to SPP's Western Joint Dispatch Agreement, which guarantees participants a say in the market's ongoing evolution, as another factor in their decision to join the WEIS.
SPP's reputation and experience, its independent board of directors, stakeholder process, and governance structure make it "an excellent choice for operating a market," Paul Sukut, Basin Electric CEO and general manager, said in a news release. Meiman and the WAPA regional managers echoed this endorsement based on previous dealings with SPP.
Tri-State CEO Duane Highley said participation in the WEIS supports his company's rapid transition to cleaner energy and greater flexibility and presents "the shortest time frame to achieve efficiencies, drive cost savings and support our rapid addition of renewables."
SPP's announcement does not reflect the intentions of four other Colorado utilities—Xcel, Black Hills Energy, Platte River Power Authority and Colorado Springs Utilities—that announced Aug. 30 they had hired a consultant to aid them in evaluating whether to join an EIM. Those utilities are considering both CAISO and WEIS. Results of the study are expected by the end of the month, with a decision by the end of the year (see CEM No. 1555).