'This is just the beginning': Southwest Power Pool begins operating Western imbalance market

Dive Brief:

Southwest Power Pool (SPP) on Monday began operating its new Western Energy Imbalance Services (WEIS) market, kicking off the real-time balancing market with a half dozen regional utilities participating.
The WEIS has been in the works for more than a year, and SPP says many of the participants are now evaluating full membership in the SPP regional transmission organization (RTO). A Brattle study last year concluded adding members could produce $49 million in annual savings for consumers and SPP.
Utilities joining the WEIS say the new service will help accelerate their decarbonization goals. There are concerns from some clean energy advocates, however, that SPP's new market creates a transmission seam across Colorado and may not be as efficient as a single RTO serving the state.

Dive Insight:

The launch of SPP's new balancing market will help participating utilities supply cleaner, cheaper energy, but Colorado is now served by two grid authorities and it remains to be seen if this is the most efficient method, according to Amanda Ormond, managing director of Western Grid Group. The organization works to accelerate the integration of cost-effective, low-carbon resources.

Xcel Energy and three other electric utilities in Colorado last year committed to join the California ISO's own Western Energy Imbalance Market.

"Utilities that join the SPP WEIS are sure to find what utilities (balancing authorities) have found in the California Energy Imbalance Market, significant, measurable savings for customers," Ormond said in an email. And reliability will be improved through their ability to purchase resources every five minutes to meet imbalances in their systems, she said, rather than hourly.

"Of concern is the 'seam' that is created in Colorado where utilities within the state are taking services from two different RTOs," Ormond said. "Utilities joined the [SPP] WEIS before there is a full understanding of what seams issues will surface and what they will cost to resolve."

The regional utilities participating in SPP's new market are optimistic for potential savings. Those include Basin Electric Power Cooperative, Deseret Power Electric Cooperative, the Municipal Energy Agency of Nebraska (MEAN), Tri-State Generation and Transmission Association, the Western Area Power Administration (WAPA), and the Wyoming Municipal Power Agency.

SPP's five-minute WEIS intra-hour market "will greatly aid in the integration of more renewable resources," Tri-State CEO Duane Highley said in a statement. The utility has been adding green power and making plans to shutter coal generation.

"This is an important first step toward a full RTO in this region to help Tri-State meet its clean energy goals," Highley said.

Changes in the grid's generation mix, energy demand and transmission are complicating day-to-day operations, according to WAPA Administrator and CEO Mark Gabriel. The SPP market can help address those challenges.

"We have said for years that markets are coming to the West," Gabriel said in a statement. "We are now realizing those predictions across the interconnection first in the form of energy imbalance markets, which will benefit our customers and their consumers by meeting real-time fluctuations in demand."

SPP previously operated an imbalance market from 2007 to 2014, and officials say that market saved participants about $100 million in its first year of operation. The grid operator has cautioned it is too soon to know what savings the new WEIS will produce. SPP said that like its previous markets, the WEIS will "provide price transparency of wholesale energy, allow parties to trade bilaterally and hedge against costly transmission congestion."

And if SPP expands its full membership to include Basin Electric Power Cooperative, MEAN, Tri-State Generation and Transmission Association and WAPA, the grid operator says it will be able to grow the services and savings it provides.

"I'm hopeful this is just the beginning of valuable partnerships between SPP and western utilities that will help them and the customers they serve meet their financial, reliability and renewable-energy goals," SPP President and CEO Barbara Sugg said in a statement.

Along with the new WEIS, SPP said it offers other services to utilities under its Western Energy Services umbrella. In 2019, SPP launched its Western Reliability Coordination service. And last year, the grid operator was hired to be the program developer for the Northwest Power Pool's regional Resource Adequacy Program.