Investment Across Organized Markets Show the Benefits of Competition

Two regional organized markets demonstrated the benefits of competition through the Regional Transmission Organizations/Independent System Operators this week. The Southwest Power Pool (SPP) unveiled major long-term transmission plans and the Midwest ISO (MISO) reported more than a billion dollars in market benefits over the past year.
 
SPP, an RTO serving parts of nine states, tackled the challenges of grid modernization with their Integrated Transmission Planning 20-Year Assessment (ITP20), which provided $176 million worth of new transmission construction projects and a strategic “roadmap” to provide flexible solutions for electricity transmission in an uncertain economic and political climate. The projects are estimated to create benefits more than five times greater than the engineering and construction costs needed for new transmission, as well as create access to more renewable power generation, reduce emissions, increase reliability, and streamline energy transportation.
 
Once again, market forces have provided financial incentives for power suppliers and private entities to invest in technologies that increase grid efficiency and enable integration of renewable power sources – an incentive clear to Nick Brown, SPP President and CEO. “A well-planned, robust transmission grid gives us flexibility to move energy from diverse generating resources to where it’s needed across the region and beyond,” said Brown. “Adding more ‘lanes’ to the transmission highway will improve our ability to provide the least-cost power to consumers and strengthen the grid reliability so power is always there when we need it.” 
 
In addition to its transmission plan assessment, SPP announced the latest step it is taking to develop an integrated marketplace. This day-ahead market will maximize cost-effectiveness for generators across the region by providing them greater access to reserve energy, improving regional balancing of electricity supply and demand, and facilitating the integration of renewable resources. SPP is beginning negotiations with vendors to develop work statements, with the goal to implement the market in 2014.
 
Further to the north, the MISO detailed the qualitative return market-driven investment can create. An updated value proposition study of the grid operator identified $1.3-1.6 billion in annual benefits to its members and customers, and a full $650-875 million of that total came from greater grid reliability and efficiency – a direct result of market forces at work. MISO’s investment in integrating wind power also paid off with a savings of $34-42 million.
 
The benefits of restructured wholesale electricity markets are clear: competition drives planning, innovation and investment, as evidenced again today by SPP’s announcement. MISO’s members and customers are the latest to reap the rewards of competitive markets, and with continued investment in grid technology and renewables integration, wholesale markets can expect to see these types of returns continue in the future. 
 

Joel Malina | January 31, 2011