trending Market Intelligence /marketintelligence/en/news-insights/trending/qlEPSnfJXvImfEYzwxs9PA2 content esgSubNav
In This List

Consumers could save billions with market reforms, wind and solar group says

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Consumers could save billions with market reforms, wind and solar group says

Millions of customers in the PJM Interconnection and Midcontinent ISO could save nearly $7 billion annually with electricity market reforms outlined by the Wind Solar Alliance, according to a report that the organization released recently.

The nonprofit Wind Solar Alliance, or WSA, in November 2018 issued a plan for making multiple changes to the way regional transmission organizations, particularly those covering the Midwest, Great Lakes and mid-Atlantic regions, operate in the U.S.

A report released by the WSA on Oct. 2 quantified the consumer benefits of that plan, which was entitled "Customer Focused and Clean: Power Markets for the Future." According to the follow-up report called "Quantifying the Consumer Benefits of the Market Reforms in the Report, 'Customer Focused and Clean'" and co-authored by Michael Goggin, vice president of Grid Strategies consultants, the amount of savings consumers realize would depend not only on which reforms are adopted but also on the levels of renewable energy that are used.

During a press call announcing the new report's release, Goggin defined a low level of renewables as 20% or less of the overall energy mix and a high level as in the 30% to 40% range.

With suggested market reforms, a low renewables range in PJM could produce up to $1.8 billion in annual savings, and a high renewables range could result in a $3.7 billion annual savings, Goggin said. In MISO, the low and high savings were estimated at $650 million and $3.2 billion, respectively. For the two markets combined, the projected total annual savings under a low-penetration scenario would be $2.5 billion and under a high-penetration scenario would be $6.9 billion, he said.

All those figures assume that price responsive demand resources would fully participate in the market, Goggin said.

Old market rules hinder new technologies

Study co-author Michael Milligan, principal of consulting firm Milligan Grid Solutions, said the recommended reforms envision minimal self-scheduling of generation resources. Goggin said many power markets do not fully dispatch generators through centralized markets but instead schedule them separately at set output levels, depriving the market of flexibility and forcing consumers to pay higher prices. The study said a significant amount of coal plant capacity would be uneconomic without self-scheduling.

"The existing wholesale power market rules were largely developed for slower-to-react, 'conventional' generators, such as coal and nuclear plants," Milligan said.

Goggin said artificial barriers are preventing the full participation of renewables, storage and other new technologies in the PJM and MISO markets. According to the report, the reforms would provide real-time price signals that reward flexible energy resources and would allow renewable and storage resources to provide reliability services.

At the press conference, Electricity Consumers Resource Council, or ELCON, President and CEO Devin Hartman said his organization, which represents large industrial customers, is not endorsing any particular market reforms addressed in the reports. He nevertheless praised the effort to quantify the plan's customer benefits. While ELCON is "fuel neutral," discrimination against "unconventional" resources adds costs, he said, and market reforms are needed in order to provide reliability and cheaper energy. The studies are valuable for setting the market reform agenda, Hartman continued, noting, "I do think the report, on the whole, contributes a lot of value to public discussion of market design."

Consumer Advocates of PJM States Inc. Executive Director Greg Poulos said barriers exist to wind and solar resources participating in the market and PJM struggles to provide the best use of those resources.

Consumer Advocates of PJM States President Kristin Munsch, who also is deputy director of the Illinois Citizens Utility Board, said an increasing number of residential consumers want more clean energy, and wholesale markets should evolve to meet that demand. While not endorsing any specific recommendations, she said the two WSA reports represent an important step toward providing a common understanding of the issues.