On April 4, Southwest Power Pool (SPP) publicly announced our interest in building and operating an energy imbalance market in the West. Those who know SPP’s history of successful market administration and steady growth saw the announcement as a natural step in our company’s evolution: a trusted leader in electric reliability pursuing the opportunity to bring its services to a new set of customers. Others less familiar with our track record and customer-focused approach to business may be wondering: Why this move? Why now? And why should potential customers choose SPP?
First, some clarity regarding what we’re offering. An energy imbalance market is a market like any other, facilitating the purchase, sale, and trade of a product. In the case of an electricity market, sellers are typically generators with excess power beyond what they need to serve their load obligations. Buyers are those looking for power to meet demand, because they either don’t have enough or can buy it more cheaply than they can generate their own.
An energy imbalance market, specifically, dispatches the lowest-cost available power in near-real time to keep generation and load in balance. It charges and compensates market participants according to generation/load imbalances, or the differences between the amount of energy they planned to generate or consume at a given time and the amount they actually did.
SPP has a successful track record as a market operator, and SPP-operated markets have a track record of providing big benefits. When we launched our original energy imbalance market in 2007, it paid for itself nearly three times over in just one year. That market ran until 2014 when we implemented a suite of additional products including day-ahead unit commitment and ancillary services, which we now collectively call our Integrated Marketplace. That market — which we launched on time and on budget, the first among our peers to do so — has brought participants cumulatively more than US$2.7 billion since it went live in March 2014.
In the West, we propose building a market tailor-made to our customers’ needs. We’re not just a tested market operator, we’re a proven market designer with experience facilitating win-win outcomes for diverse customers with divergent, sometimes even competing interests.
There’s a reason our April 4 announcement didn’t come with a detailed description of the market we aim to build. It’s because our first step in this process is to listen to Western utilities and learn what they want out of a market. We’ll certainly bring the benefits of our experience to bear in designing a product guaranteed to benefit the region, but we’ll do it the way we’ve always done business. We’ll work with market participants and others to provide more than just an energy market. We’ll provide peace of mind that an SPP-administered market is the right thing for the region, designed and operated for the right reasons in the right way.
Why offer this service now, when others are already offering energy imbalance services in the West, and SPP has its hands busy both serving members of its regional transmission organization (RTO) and implementing reliability coordination (RC) service in the West for the first time?
Our experience has shown that multiple entities working to ensure the reliable and affordable supply of electricity is preferable to one entity going it alone. We’re one of the 13 reliability coordinators keeping the lights on across the Eastern Interconnection, and one of the five independent system operators and RTOs operating wholesale electricity markets in the East. Rather than getting in each other’s ways, healthy competition and necessary collaboration has resulted in more watchful eyes identifying potential contingencies; more parties preparing and implementing solutions; and thus, high degrees of reliability.
As for the timing and strategic nature of this step, we feel now is the perfect time. Our own markets and the staff and systems that support them have reached a level of maturity that positions us perfectly to implement another market iteration in the West. We’ve also gained much in the course of standing up our Western RC services, both in the way of experience, and helpful tools like system models and data connections which will contribute directly to a smooth and cost-effective market implementation.
Finally, an SPP-operated Western market lays the foundation for more opportunities in the future. We will offer energy imbalance market services on a contract basis, no strings attached. Market participants will not be required to join the SPP RTO. We are fully confident, though, that customers will receive such significant benefits and be so impressed by our customer service that they’ll want more. Our last energy imbalance market led to the development of the Integrated Marketplace, and many of our market participants ultimately joined our RTO to reap the benefits of other services like transmission planning, reliability coordination and more.
SPP has provided electric reliability for more than 75 years. Our model and customer-service record are proven, as are the value of our services. To utilities in the West who face the daunting task of ensuring electric reliability and affordability for their customers, we invite you to join us on the ground floor of a game-changer for your region. Through years of experience and a customer-centric approach to market development, SPP has proven that energy imbalance markets can make your task easier and more efficient.
