Dive Brief:

• Federally-owned Tennessee Valley Authority is part of Southeast discussions to create a larger regional energy exchange, an executive from the utility dealing with transmission and power supply told the Chattanooga Times Free Press.
• Energy companies, including Duke Energy and Southern Company, are exploring a "centralized, region-wide, automated intra-hour energy exchange" called the Southeast Energy Exchange Market (SEEM) that has been likened to an energy imbalance market (EIM).
• Duke's Florida subsidiary would not participate given the state's interconnection to the surrounding region, executives told the Charlotte Business Journal. The largest utility in Florida, NextEra Energy, has not responded to inquiries into its participation in SEEM discussions, which have taken place over the last several months.

Dive Insight:

While more names join the list of interested utilities, details remain vague about how the market would evolve in the Southeast. SEEM plans are missing a resource adequacy or reserve-planning component, according to Mike O'Boyle, electricity policy director at Energy Innovation.

SEEM is intended as a 15-minute energy wholesale market, and according to Christopher Clack, CEO and founder of consulting group Vibrant Clean Energy, having a more granular, intra-hour signal of grid activity is important for taking advantage of renewable energy on the grid.

"If the scheduling is truly 15 minutes, then that's a good thing, [but] we would need to know what the interconnection costs are going to be ... for the new assets," he told Utility Dive.

The access charge fee ought to be used to build out transmission across the footprint "specifically to enable integration of new [renewable] generation," as Clack says that is the lowest-cost generation in the region currently.

The SEEM would need to also remove self-scheduling, to not allow must-run assets in the market and let more economically competitive assets guide the marketplace, he added.

Before the utilities make official filings with regulators, they would ideally bring in state regulators and other stakeholders into the discussions, Jennifer Chen, federal energy policy senior counsel at Duke University's Nicholas Institute for Environmental Policy Solutions, told Utility Dive.

Another unknown is the operating entity for SEEM and its independence from participating utilities, stakeholders told Utility Dive. If it were to operate as an energy imbalance market, other EIMs have independent operators and governing boards. Duke and Southern executives have told the Charlotte Business Journal that the intent is to operate efficiently "without bureaucracy." 

SEEM has "some characteristics that make it market-like ... but it certainly won't reap as much," Chen said, by matching up buyers and sellers in the region. She likened it to Southern's existing energy auction program.

According to Duke spokespersons, SEEM is not intended as a regional transmission operator nor would it block participating utilities from joining an RTO.

While details on the energy exchange remain vague, skepticism is growing among stakeholders regarding the impact of this development on legislative efforts in the Carolinas to establish an RTO.

"A state can, through legislation, require its regulated utilities to form or join an RTO," Chen said, pointing to Virginia's actions nearly two decades ago. "There is a big difference between what an RTO can offer versus an EIM, and therefore an even larger difference between a less formal energy exchange and an RTO."

All in on Southeast effort?

Participating electric co-operatives and investor-owned utilities would span from parts of Oklahoma to most of Georgia, including swaths of Alabama, the Carolinas, Iowa, Kentucky, Missouri and Mississippi and all of Tennessee. By comparison, PJM Interconnection, the largest wholesale energy market in the U.S. covers parts of 13 states.

"For a small co-op, it's a no-regrets sort of move" if surrounding utilities are participating, O'Boyle said, as it allows smaller entities to access lower cost power in real-time as opposed to balancing supply and demand across its own system. Some aspect of energy trading to balance supply and demand between Southern utilities already existed, but SEEM would grow that region.

Details on the energy exchange incentives and benefits for utilities that have joined the discussion remain sparse.

"If we determine that partnering with our neighbors makes sense, we'll certainly take the appropriate steps to describe that more fully for the 10 million people we serve," Jim Hopson, TVA's public information officer, told Utility Dive.

TVA's largest customer has begun exploring the idea of exiting the federally-owned corporation's service in an effort to lower electricity bills. TVA did not address whether those considerations played a role in its involvement with SEEM.

Southern and TVA could potentially use their participation in the market to ensure they are able to maintain a large generation fleet by allowing other utilities in the region to use their excess power, said Clack. "Both Southern and TVA are going to be long on capacity."

If SEEM is operated independently, he said an independent governing board would ensure equity between all customers, preventing one utility from benefiting more than another.

While more utilities have disclosed their participation in discussions about SEEM, Florida utilities have not. Florida's generation diversity would greatly benefit the energy exchange, Chen said, as the state has a large amount of solar penetration and continues to add renewable resources.

Florida and other customers in the region would benefit from the participation of Florida utilities as they plan to install gigawatts of renewable energy, she said.

According to Chen, the load shape in the state could run into something similar to California's duck curve problem "if [Florida] really ramps its solar."