RENEWABLE ENERGY

First-of-a-kind utility plan could transform Southeast grid

Utilities in the Southeast are rallying behind a surprising cause: a new electricity market that could boost renewable energy in a region still dominated by fossil fuels.

The push from the area's energy giants to buy and sell their excess electricity could help them meet net-zero carbon targets but also change a business model they have relied on for decades. The so-called Southeast Energy Exchange Market (SEEM) would expand one major utility company's trading system to create a platform for buying and selling excess wholesale electrons every 15 minutes.

The effort could open pathways for clean energy to the Southeast's dominant investor-owned utilities: Dominion Energy Inc., Duke Energy Corp. and Southern Co. Also involved are public power providers Tennessee Valley Authority, Missouri-based Associated Electric Cooperative Inc. and Santee Cooper.

The utilities hope to file a petition with the Federal Energy Regulatory Commission by the end of the year. If approved, it would be the first regional wholesale market of any kind in the Southeast.

Skeptics are wary that SEEM could be an industry ploy to get out ahead of potentially more intrusive market reforms aimed at accelerating the transition away from fossil fuels.

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Three of the companies involved — Dominion, Duke and Southern — have net-zero carbon targets, and TVA has aggressive carbon-cutting goals as well. All are adding more renewables to their generation fleets and have been discussing SEEM since at least early this year.

Including TVA and Associated Electric is significant because it would expand the market to include two time zones. This would allow excess renewables such as solar and wind to be funneled to parts of the country to be used during peak demand times.

"It absolutely helps with managing the system and furthers our ability to reach those goals," said Lee Xanthakos, a vice president of Dominion Energy South Carolina, in a recent interview.

Excess power can come from any type of generation, but if approved, the new market would come at a time when the electric companies are adding more renewables to their power grids, closing the last of their coal plants and pushing to keep natural gas for decades to come.

"This is a tool to integrate higher levels of renewables on the system," said Noel Black, federal regulatory affairs vice president for Atlanta-based Southern.

North Carolina, for example, is the nation's No. 2 state for solar, and South Carolina's policies also are starting to favor renewable electricity. Duke is integrating large amounts of clean energy resources into its power grid in those states, mostly from utility- and commercial-scale solar.

Solar developers have long criticized Duke for not connecting those projects to the grid in a timely manner. What's more, some of the developments have been clustered in certain areas, creating an energy oversupply that has led Duke to curtail the excess power.

Duke recently settled a longtime dispute with solar developers in North and South Carolina over connecting a glut of utility-scale projects to the grid (Energywire, Sept. 11). Developers agreed to let Duke curtail their solar projects up to 10% at a time when transmission lines get congested.

SEEM is one answer to that congestion problem, said Alex Glenn, Duke's senior vice president of state and federal regulatory legal support.

"We're seeing gigawatts of solar coming on the system, already on the system — and much, much more to come in the next several years — and this will help us not curtail that," he said.

The chief drawback from renewables is their intermittency, which is why bridging two time zones is key, SEEM's backers say. The dominant renewable fuel in the Southeast is solar, which can be channeled to Associated Electric in the Midwest, whereas Associated Electric can contribute some of the 1,200 megawatts of wind on its system to the South.

What's more, there has been a glut of wind power in the Midwest overnight, when demand is low, forcing some electric companies to sell the power at negative pricing. Being able to shuttle that electricity south during the high-demand period of the early morning, when the sun isn't shining, can benefit Associated Electric, a generation and transmission cooperative sandwiched between two competitive wholesale power markets.

"One of the advantages of an organized market is to be able to share resources, and we think we can do that without turning over control [to a grid operator]," said Associated Electric CEO Roger Clark.

'We don't know what this is'

SEEM's momentum is surprising for an area dominated by traditionally regulated electric companies, whose executives are not shy about wanting to preserve business models that let them recoup multibillion-dollar capital investments from customers and reward shareholders with a healthy return.

News about prospects for a new market started trickling out in July, surprising clean energy and renewable advocates.

But details are still thin. Many advocates are staying on the sidelines until the electric companies file documents with FERC.

"It's a complicated issue," said Maggie Shober, power markets analytics director at the Southern Alliance for Clean Energy. "We see the potential for some level of market competition to be a good thing in the Southeast ... but we don't know what this is."

The push also comes at a time when individual states and utilities are discussing market reform options, leaving some to wonder what's driving the proposal.

"Is SEEM going to be a bump in the road toward a more fundamental energy market reform, or is it going to be a dead end on that path of reform?" said Frank Rambo, a Charlottesville, Va.-based senior attorney with the Southern Environmental Law Center. "Or are you going to be more forward-looking, like the other 70% of the country?"

Clean energy advocates have wondered whether the SEEM proposal is aimed at staving off the chance for state regulators to decide that a regional transmission organization is the best choice. An RTO model would force major power utilities to hand over the reins to some grid operations, whereas SEEM would be voluntary in nature.

"Is SEEM a selling tactic for the utilities who aren't interested in joining an RTO?" said Jennifer Chen, president of ReGrid Energy Policy Consulting.

A recent report from Chen examines various types of markets, including an RTO and an energy imbalance market, and broadly states that electricity trading can help improve efficiency. Chen told E&E News that the number of utilities that are interested in SEEM is "impressive," and she hopes state regulators will ask detailed questions.

"They are the ones that have to lay down the requirements for utilities," she said.

Xanthakos from Dominion and Glenn from Duke Energy both said the SEEM proposal doesn't affect discussions of an RTO or any other type of market.

Seeking the best of both worlds

The electricity industry is known for keeping tight-knit circles where resources are shared in situations such as restoring power after a natural disaster. There's also plenty of discussion about how best to continue the transformation away from fossil fuels.

To that end, the utilities across the Southeast said, they began to talk about creating a market structure with little bureaucracy and a lot of customer benefits. The companies involved are known for using political muscle to influence state and federal regulatory policy.

The idea was to have the best of both worlds: to preserve each company's independence but still share resources.

The result would widen Duke Energy's so-called balancing authority for its service territory in the Carolinas, and would similarly expand Southern's system for managing its regulated electric companies in Alabama, Georgia and Mississippi.

Electric company officials described SEEM as a "market-driven" approach where bids for electricity are loaded into an electronic system and then matched with the need on the other end. This model is less centralized than an energy imbalance market, where utilities retain control over their systems but a regional grid operator manages additional trades in real time.

Proponents of SEEM say it would allow power providers to meet their own demand needs and then buy or sell excess energy at a lower cost.

"What we're trying to do here is find a way to take the friction out of the market," said Black of Southern.

"It's what really brings us together and effectuates scale across the Southeast."

A surprise player

Duke's involvement in SEEM came as a surprise to advocacy groups working on the road map for meeting North Carolina's 2050 net-zero carbon goal. Duke officials have been at the table early this year to develop the clean energy plan, which derived from an executive order from the state's Democratic governor, Roy Cooper (Energywire, Sept. 30, 2019).

One working group involved in the discussions was focused on energy market reform and included talks about a regional transmission organization and an energy imbalance market, according to Peter Ledford, general counsel for the NC Sustainable Energy Association.

"Why didn't Duke volunteer, 'Oh, we're talking about an energy exchange market'?" Ledford said.

Dionne Delli-Gatti, a Raleigh, N.C.-based regulatory and legislative affairs director for the Environmental Defense Fund, said Duke "was starting to build trust" among clean energy advocates before SEEM "got dropped in everyone's lap."

She said she told Duke's North Carolina president, Stephen De May, about SEEM's chilly reception.

Duke is aware of the tension. Spokesperson Erin Culbert said the company had been busy evaluating the market proposal, commissioning a study of SEEM's potential that wasn't finished until July.

"We wanted to make sure that it was worthwhile" before discussing the plan widely, Culbert told E&E News. "We really wanted to make sure there was promise in the concept first."

Meanwhile, state-level political leaders are weighing other options for the grid.

Bipartisan lawmakers in North and South Carolina floated bills to study an electricity market that's different from the regulated ones that Dominion and Duke operate in (Energywire, April 19, 2019).

South Carolina lawmakers set up a new committee to study ways to inject competition into the state's electricity market during a special session last month. The panel would look at all options, including setting up a regional grid operator (Energywire, Jan. 15).

"There's an active debate in the Southeast, especially in North and South Carolina, around the benefits of market reform," said Hamilton Davis, regulatory affairs director for solar developer Southern Current.

EDF's Delli-Gatti said she hopes the competing ideas don't end up taking each other out and preserving the emissions-heavy status quo.

"The big thing for me," Delli Gatti said, "is that we do not allow this to suck up all of the oxygen in the room and distract from the greater goal for 2030 and midcentury, because we are seeing the impacts of climate change: Half of the country is on fire, and the other half is getting hit by a hurricane."

Twitter: @BizWriterKristiEmail: kswartz@eenews.net

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