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Establishing a Southeast US RTO could save $384B by 2040, report finds

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Essential Energy Insights - February 2021

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Establishing a Southeast US RTO could save $384B by 2040, report finds

As U.S. utility giants Duke Energy Corp. and Southern Co. consider forming their own limited regional energy exchange market, a new analysis has found the Southeast could save billions of dollars and slash greenhouse gas emissions by adopting a fully competitive organized wholesale electricity market run by a regional transmission organization.

Released Aug. 25 by the consulting firm Energy Innovation Policy and Technology LLC, the "first-of-its-kind" analysis modeled individual integrated resource plans, or IRPs, for utilities in seven Southeastern states against the potential benefits of establishing an RTO.

Produced in cooperation with GridLab and Vibrant Clean Energy, the analysis found a southeastern RTO would create approximately $384 billion in economic savings by 2040 compared to a business-as-usual, or IRP, case.

The firms further estimated that the establishment of an RTO could cause planet-warming carbon dioxide emissions to fall about 46% by 2040 relative to 2018 levels when compared to the IRP scenario. The RTO scenario would also create about 285,000 more jobs relative to the base case fueled by the construction of 62 GW of solar generating capacity, 41 GW of onshore wind capacity and 46 GW of battery storage capacity, according to an executive summary.

At the heart of the Aug. 25 analysis is extensive technical modeling by Vibrant Clean Energy showing that all seven southeastern states located outside of wholesale organized markets Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee would benefit by sharing resources and expanding transmission to meet one regional planning reserve margin at the least cost.

Currently, utilities in those states meet their own specified load projections and planning reserve margins independently. That may begin to change, however, under a proposed Southeast Energy Exchange Market revealed in July by Duke Energy and Southern Co.

The two utilities confirmed they are communicating with Dominion Energy Inc.'s Dominion Energy South Carolina, Inc. unit; Georgia cooperative Oglethorpe Power Corporation; PPL Corp. subsidiaries Louisville Gas and Electric Co. and Kentucky Utilities Co.; Santee Cooper, known legally as the South Carolina Public Service Authority; and several electric cooperatives that serve the Southeast about the potential value of the exchange market, called SEEM. It would be a centralized, voluntary, automated energy imbalance market operating on a 15-minute-interval basis.

Utility analysts have said such a market would make sense given the increasing number of solar resources over a wider geographic area. But they also noted such a proposal could face political headwinds from state regulators who may be reluctant to relinquish certain power resource responsibilities.

The Aug. 25 analysis included a companion policy report with incremental policies regulators can adopt to encourage further competition. Recommendations in that report, for example, included moving toward a regional energy imbalance market that allows transmission-connected utilities to buy and sell energy on a real-time basis.

However, the policy report noted that an energy imbalance market alone gets "nowhere close to the economic and renewable integration benefits of regional operation and vertical restructuring." Between 10% and 20% of the RTO scenario's benefits were a direct result of adopting a regional approach, the report said.

Any effort to establish an RTO in the Southeast would ultimately need to be approved by the Federal Energy Regulatory Commission.