The Federal Inflation Reduction Act, signed by President Joe Biden in August, makes historic investments to accelerate the energy transition, reduce carbon emissions, and foster clean energy development. But if we’re serious about tackling climate change, promoting clean energy is only part of the equation.
To maximize investment in the Inflation Reduction Act, the West will enable the deployment of organized electricity markets, cost-effective and clean energy while maintaining reliability for the benefit of all customers. We must also look for opportunities to develop markets for
Today’s fragmented grid in the West is creating unnecessary costs for all customers and creating inefficiencies for businesses seeking access to reliable, affordable, clean energy.
However, creating regionally organized markets, controlled by regional transmission organizations, addresses the two biggest problems facing electricity consumers in the West: reliability and cost. Interconnecting the West improves reliability, and power costs are likely to come down as the region’s power mix responds to market signals and shifts to clean energy.
In the orchestra of utilities, the organized market acts like a conductor, independently operating the transmission and directing the wholesale market generators throughout the region. Along the way, you’ll gain multiple benefits, including:
- Reducing power generation costs through competitive processes is even more important amid rising energy prices.
- Increased reliability by sharing resources and building transmissions.
- Promote innovation by providing a level playing field for the faster incorporation of advanced technologies.When
- Create more customer options for promoting clean energy.
In Colorado, competition pays off. For example, Xcel Energy’s all-source competitive solicitation saw record low procurement prices for wind, solar and storage batteries. Competitive approaches with proven benefits need to be expanded to include regionally organized markets.
A recent multistate western market study showed potential cost savings of $2 billion from more regional electricity market consolidation. A Colorado study similarly found that “full utility participation[in the region’s transmission organization]could provide approximately $230 million annually through reserve sharing, operating costs, and infrastructure investment savings.” was shown. A recent study found that contagious organisms in the western region could increase gross regional product by $79 billion annually across the west.
These savings could actually be even greater after the Inflation Reduction Act is passed. The legislation will significantly reduce the cost of wind, solar, and other clean energy technologies through 2030, increasing clean energy’s cost advantage in a highly competitive market.
Despite years of debate, the state is making significant strides forward, modernizing outdated power market designs, including in the West, which has no organized power market outside of California.
Last year, Colorado and Nevada passed legislation requiring transmission utilities to participate in organized wholesale markets, specifically those managed by regional transmission organizations or independent system operators, by 2030. was enacted.
Instead of capitalizing on this forward momentum and seeking opportunities to build organized wholesale markets, there are utilities that want to unilaterally develop, oversee and operate more limited western power markets. A timeline dominated by leisurely discussion and utility is simply too late. Consumers deserve the benefits of a market that sooner or later combats energy price inflation.
Incremental change managed by utilities without big plans is a recipe for negligence. A region-wide organized market that actively incorporates diverse resources and schemes to build adequate transmission is the best way to promote affordable, reliable and clean energy. Many western states are committed to clean energy goals. However, these goals are more expensive and slower when tackled solely within state borders.
The West needs a comprehensive approach. It’s an approach that builds the collaboration, trust and transparency needed to explore full market options. Energy consumers want and need affordable and reliable energy. But they also want more competition, transparency and cleaner power options.
Now is the time for the West to give clear direction to utilities entering the electricity market. State legislators and utility commissions are uniquely positioned to direct utilities to enter the types of markets that maximize customer impact but require support.
The U.S. Department of Energy launched the Wholesale Electricity Markets Technical Assistance and Grants Program for Congress to provide grants to states to help evaluate new markets and market improvements, including market governance and regulatory development support. requesting funding for
As the West explores market options, new stakeholders and industries dedicated to clean energy cost reductions and flexible approaches to market management must actively participate. Most importantly, Colorado needs to lead these efforts with urgency. This is to bring economic benefits to all energy customers and position the state as a leader in innovation and technology.
Englewood’s Ron Lehr is chairman of New Energy Economics and former chairman of the Colorado Utilities Commission.
Misty Groves, formerly of Boulder, Washington, DC, is Vice President of Policy and Market Innovation for the Clean Energy Buyers Association.
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