A dozen of some of the biggest utilities in the West are banding together to evaluate regional market opportunities, giving more momentum to the growing interest in forming a centralized market in the West to help meet state-mandated carbon-reduction goals.
The Western Markets Exploratory Group (WMEG) announced Oct. 5 it is "exploring the potential for a staged approach to new market services, including day-ahead energy sales, transmission system expansion, and other power supply and grid solutions consistent with existing state regulations," according to a news release. The group hopes to identify market solutions that can help achieve carbon-reduction goals while supporting reliable, affordable service for customers.
WMEG, which began in July with informal discussion among CEOs, includes Xcel Energy-Colorado, Arizona Public Service, Black Hills Energy, Idaho Power, NV Energy, PacifiCorp, Platte River Power Authority, Portland General Electric, Puget Sound Energy, Salt River Project, Seattle City Light and Tucson Electric Power.
The effort stems in part from the need to comply with newly enacted state laws in Nevada and Colorado requiring utilities to explore joining a regional market by 2030.
FERC has also indicated heightened interest in seeing markets form, and Congress and the Biden administration are now talking about additional transmission investments and greater interconnectivity.
"In some ways, it's not remarkable that utilities are looking at market opportunities in the West, but what is remarkable is the regional diversity in this group, as well as the diversity in business models," Scott Bolton, senior VP of transmission and markets development at PacifiCorp, told Clearing Up. "It's not just the big IOUs, but municipals and consumer-owned utilities that are all looking at the question at the same time and are willing to work together."
After years of study, Western consumer-owned utilities have recently shown interest in organized markets.
BPA recently announced it would be joining the Western EIM in 2022 and would be active in helping form other markets (CU No. 2024 ). Earlier this year Western Area Power Administration announced it, too, was joining the EIM. Taken together, it shows Western consumer-owned utilities are now also open to markets.
The activity around markets is happening as the California ISO is planning to relaunch discussions about creating an energy day-ahead market, and will hold a forum Oct. 13 on its EDAM proposal that is likely to attract many Western utilities and other stakeholders.
It's also happening on the heels of a report from state energy agencies, "Exploring Western Organized Market Configurations," showing massive benefit to the formation of a day-ahead market and Westwide regional transmission organization.
The study found that expanding current and planned real-time-only markets to include day-ahead market services could result in Westwide annual gross savings of up to $642 million, while a Westwide day-ahead market could result in $747 million per year in gross benefits. However, splitting the Westwide market into two separate markets produces a lower annual benefit of $501 million.
The report found that "the RTO framework is expected to provide increasing levels of gross benefits over time. In the present day, an 'overnight' RTO could generate as much as $1.3 billion of benefits annually. However, by 2030, this benefit estimate grows to nearly $2 billion per year. By 2030, capacity savings make up the majority of the overall RTO benefits quantified in this study."
Many of the entities in WMEG are currently participating in or preparing to join the CAISO's EIM, or have announced plans to evaluate energy imbalance services. WMEG's discussions will not impact participation in or evaluation of those markets in the short-term, as the group is focused on long-term market solutions.
"For us, the EIM has been foundational," Bolton said. "It's been a huge success and benefited our customers. It's been really transformational in how we look at not just optimizing our own system, but how the West can optimize our resource base."
Bolton said the work around WMEG isn't related to the EDAM forum, and noted the BPA and public power's interest in markets was "fantastic" and a "truly great development for the region."
Spencer Gray, executive director of the Northwest and Intermountain Power Producers Coalition, called the formation of the WMEG "positive and necessary to have the region's transmission owners and load serving entities together supporting a regional market and transmission solution."
"The day-ahead market is the logical incremental step beyond the EIM, but not the final step," he said. "The region has got to look at a variety of options."