The details of a proposed voluntary energy exchange market in the U.S. Southeast are beginning to take shape.
On Dec. 11, a coalition of large investor-owned electric utilities and smaller electric cooperatives filed a proposal with regulators in the Carolinas that aims to establish an intra-hour bilateral market designed to exploit extra transmission capacity to deliver cost savings and improve renewable energy resource integration.
The proposal, dubbed the Southeast Energy Exchange Market, or SEEM, comes as southern state regulators and the monopolies they oversee have come under increased pressure to move toward a more competitive market framework.
In July, two of the region's largest publicly traded electric utilities — Southern Co. and Duke Energy Corp. — confirmed having early discussions with other utilities on creating a regional energy market. While power sector observers offered mixed reviews of the idea, which is far short of establishing a competitive regional transmission organization, they generally agreed that a bilateral energy exchange market could help with the integration of variable renewable generation.
A July analysis conducted by Guidehouse and Charles River Associates on behalf of potential SEEM participants found the new market structure would save customers approximately $40 million annually compared to the status quo. The consulting firms estimated that figure could rise over time to $100 million annually by 2037 under a carbon-constrained outlook that assumes higher levels of renewable and energy storage penetration.
Meanwhile, a third-party analysis released in August by Energy Innovation Policy and Technology LLC in cooperation with GridLab and Vibrant Clean Energy estimated that establishing a southeastern RTO would create approximately $384 billion in economic savings by 2040 while slashing emissions 46% relative to 2018 levels.
And a law signed in September by South Carolina Gov. Henry McMaster has tasked a new legislative committee with studying whether the state should adopt a variety of electricity market reforms, including whether South Carolina should form its own RTO or join an existing one.
Against this backdrop, SEEM's backers plan to soon ask the Federal Energy Regulatory Commission to approve their proposed market. The Dec. 11 notice to regulators in the Carolinas was submitted as a "courtesy preview" before an identical filing is expected to land at FERC by the end of the year. The notice was also required under North Carolina regulations.
A related Dec. 11 news release noted the proposal arose from discussions with "numerous energy regulators, policymakers, consumer advocates, non-governmental organizations, energy associations, solar developers and business customers," adding that "feedback helped strengthen the platform agreement by adding more transparency measures." If approved, SEEM could begin operating as early as the fourth quarter of 2021, according to the release.
Under the proposal, SEEM members would establish a 15-minute energy market that automatically matches participants across a wide geographic area. Building on the region's existing bilateral framework, the new market would be the first of its kind for the region.
Bids and offers would settle using a "split the difference" method, where a theoretical bid for $20 and offer for $30 would settle at $25. That stands in contrast to the Western Energy Imbalance Market run by the California ISO, which operates at 5-minute intervals and settles at the lowest offer price.
The Dec. 11 notice also details SEEM's membership and participant criteria and establishes a governing board and operating committee. Operating costs will be allocated to each member using a formula based on that member's net energy load. If FERC does not accept the proposal as filed, members can make revisions through an affirmative supermajority vote.
SEEM's founding members are expected to include Southern, Duke Energy subsidiaries Duke Energy Carolinas LLC and Duke Energy Progress LLC, Dominion Energy Inc. subsidiary Dominion Energy South Carolina Inc., PPL Corp. subsidiary LG&E and KU Energy LLC, the Tennessee Valley Authority, South Carolina Public Service Authority, known as Santee Cooper, Associated Electric Cooperative Inc., City of Dalton Utilities, Georgia System Operations Corp., Municipal Electric Authority of Georgia, North Carolina Electric Membership Corp., Oglethorpe Power Corp. and PowerSouth Energy Cooperative.