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Corporate coalition seeks federal action to expand US wholesale power markets

Top U.S. corporations, including Amazon.com Inc., Walmart Inc. and McDonald's Corp., are asking the federal government to prioritize wholesale power market expansion while President Joe Biden also seeks to decarbonize the nation's electricity sector by 2035.

The Jan. 25 request by the Renewable Energy Buyers Alliance, or REBA, was made in the form of a federal clean energy policy statement delivered as state regulators in the U.S. Southeast begin to explore integrating more fully their relatively siloed energy markets, with expansion efforts already well underway in the West.

Wholesale market expansion has been touted by clean energy advocates as one of the best ways to drive decarbonization efforts by allowing regional grid operators to coordinate least-cost resource dispatch across large geographic footprints.

While about two-thirds of U.S. electricity sales occur in competitive markets administered by regional transmission organizations and independent system operators overseen by the Federal Energy Regulatory Commission, large areas of the country are still dominated by vertically integrated utilities that control generation, transmission and distribution assets.

Things are beginning to change in the U.S. Southeast, however, where utility giants Duke Energy Corp. and Southern Co. are seeking to form a limited intrahour energy exchange market. Meanwhile, the Western Energy Imbalance Market operated by the California ISO is already delivering hundreds of millions of dollars in annual savings, and the Southwest Power Pool is aiming to broaden its footprint in the West as part of a long-term strategic plan as well.

Underpinning the transition

Calling for "a decarbonized power system that greens the grid for all," REBA argued in its Jan. 25 policy statement that the U.S. government can and should do more to empower FERC to facilitate the expansion of wholesale power markets.

The statement listed more than three dozen companies as signatories, including tech giants Google LLC, Facebook Inc. and Microsoft Corp., as well as The Walt Disney Co., PepsiCo Inc., and Target Corp.

"Our viewpoint is that you just can't get to a zero-carbon power sector by any timeframe cost-effectively and equitably, with an even playing field for all technologies, without wholesale markets," REBA Policy Innovation Director Bryn Baker said in an interview. "Wholesale markets is first on our statement because it really is something that's going to underpin the transition. Alone it's not enough, but it's one of those foundational constructs that we're going to need in all places."

Baker said one way FERC can generate more support for wholesale market expansion is to address a series of divisive orders issued under the Trump administration that sought to blunt state support for clean energy resources. Those orders require the nation's three eastern grid operators with mandatory capacity markets — the PJM Interconnection, New York ISO, and ISO New England to impose some version of a minimum offer price rule, or MOPR, on new clean energy resources receiving material state subsidies.

Richard Glick, a former Democratic U.S. Senate committee counsel who was named FERC chair last week, has pledged to make harmonizing state support for clean energy with wholesale capacity markets a top priority moving forward.

Baker also highlighted REBA's recommendation to provide federal financial support to states and utilities pursuing wholesale market participation, noting that she also sees a large role for the U.S. Congress to play.

"There are folks looking at how to amend the Federal Power Act, how Congress can give a bit more direction to FERC just to give it cover to start to address some of these issues, so this is going to be a conversation that plays out over the medium-term," Baker said.

State-level action

REBA has also been active at the state level, filing December 2020 comments with North Carolina regulators in a proceeding concerning the regional energy market dubbed the Southeast Energy Exchange Market proposed by Duke Energy and Southern.

The comments urged regulators to consider the clean energy impacts of the proposed market and pushed for a joint technical conference with FERC and the South Carolina Public Service Commission to provide more insight into "the range of opportunities wholesale markets can provide jointly to energy customers in the Carolinas."

A third-party analysis released in August 2020 by Energy Innovation Policy and Technology LLC in cooperation with GridLab and Vibrant Clean Energy estimated that establishing a competitive southeastern RTO would create approximately $384 billion in economic savings by 2040 while slashing emissions 46% relative to 2018 levels.