Dive Brief:
- Virginia ranks first, and Alabama last, in a Southeast power sector “competitiveness” dashboard launched this week by Duke University researchers.
- Twelve states were scored according to indicators such as participation in wholesale power markets, net metering policies, presence of a consumer advocate, interconnection standards, procurement requirements and third-party power purchase agreements.
- The top three ranked states – Virginia, West Virginia and Kentucky – all participate in a regional transmission organization or an independent system operator like the PJM Interconnection or the Midcontinent Independent System Operator, researchers noted in a call with reporters and others on Thursday. However, the Southeast lacks its own ISO or RTO, posing a barrier to participation for the more southern states.
Dive Insight:
Trey Gowdy, research lead on energy and climate policy at Duke’s Nicholas Institute for Energy, Environment & Sustainability, said on the call that there was “a lot of nuance” in their results, but that the findings generally grouped the 12 states into five tiers of descending competitiveness.
The first tier, which is the most competitive, Gowdy said, includes Virginia, West Virginia, and Kentucky, while the second tier contains Arkansas and Louisiana, the third contains Mississippi, North Carolina, Florida and South Carolina, the fourth contains Georgia and Tennessee, and the fifth contains Alabama alone.
“We kind of present those as kind of batches and possibly peer states,” he said.
Virginia ranked highest when it came to factors such as having an approved utility green tariff program, a state consumer office advocate, a requirement for limited competitive procurement for renewables and wholesale market participation.
Virginia ranked lower in variables like generation concentration and customer concentration, indicating relatively few service providers per capita.
The state’s electric utility sector, “including distribution utilities, is highly concentrated,” the dashboard says. “The state has a customer concentration (HHI) score of 4,475, which exceeds the 1,800 threshold that signals a highly concentrated market. This indicates that a small number of utilities serve customers across the state.”
The HHI, or Herfindahl-Hirschman index, “is a concept that comes from antitrust legislation” and is used by the Department of Justice to screen mergers and acquisitions, said Eric Parajon, a policy analyst for the Nicholas Institute, during the call.
He said they measured generation concentration by dividing each utility’s total nameplate capacity in a state by that state’s total nameplace capacity across generation units.
Virginia’s score “indicates a highly concentrated market,” he said. Nearly all of Virginia is covered by Dominion Energy, a monopoly utility. The state’s generation concentration was 3,540, again exceeding a 1,800 threshold set by the researchers.
Alabama, which ranked last, received positive scores for permitting municipal ownership of utilities and having a state consumer advocate office. It received negative scores for factors including its lack of statewide interconnection standards, wholesale market participation, a formal requirement for competitive solicitations and any net metering policy.
However, its HHI score for customer concentration was 3,210 and for generation concentration was 2,686 – both lower than Virginia’s respective scores.
A state’s participation in a regional transmission organization or independent system operator like PJM is “certainly a fairly significant element of competitiveness and kind of competition writ large,” and “something that we're really focused on evaluating,” said Parajon.
Jackson Ewing, director of energy and climate policy at the Nicholas Institute, said that the rankings don’t reflect that “states that scored quite high on competitiveness metrics in aggregate scored quite low in certain indicators,” and vice versa.
“I think the heterogeneity of the results that we've realized here really embodies the variance that we see across the Southeast on these issues,” Ewing said.
In the future, the team that produced the dashboard is interested in measuring factors like “interconnection queue dynamics and policies,” Ewing said, or going further “into measuring levels of public support and opposition for new build generation, transmission, distribution. We could get into permitting lag times and processes. All those are kind of outside our scope now, but are things that we're actively considering.”
Alix Zwane, the director of research and engagement strategy at the Nicholas Institute, said another “natural next step” is to examine “the relationship between competitiveness and these other ultimate outcomes of interest — whether it's consumer welfare or wellbeing or environmental outcomes.”
“There are many rich veins to mine here to build on this dashboard and the work that we've done so far,” she said.
