Dive Brief:

• Competitive pricing across the Southeast would save customers $17.4 billion a year and lead to the retirement of most coal plants and gas peakers in the region by 2040, according to new modeling from Vibrant Clean Energy on behalf of Energy Innovation.
• The report, released on Tuesday, says a regional transmission organization (RTO) scenario would represent the maximum benefits of competition in the region, a cumulative $384 billion in savings by 2040. The analysis forecasts the impacts of a seven-state wholesale electricity market being set up in 2025, spanning Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee.
• Competitive pricing through a regional electricity market would lead to decarbonization without state policies like carbon pricing and renewable energy mandates, according to the research. If the region continues on its current path, it will add about 21 GW of new renewables and storage by 2040, but competitive pricing from a wholesale market could add 131 GW of clean resources: 52 GW solar, 42 GW wind and 37 GW storage.

Dive Insight:

Vibrant's analysis follows confirmation by Southern Company, Duke Energy and others that they are part of ongoing discussions about forming a Southeast Energy Exchange Market (SEEM). However, due to the lack of details available surrounding that plan, the report did not model a SEEM-based scenario.

Experts, including Vibrant's CEO and founder, Christopher Clack, have raised concerns that a market mechanism like SEEM needs to remove self-scheduling assets and be controlled by an independent organization in order to guarantee benefits to every state in the region.

Otherwise, utilities with large generation fleets could potentially use their participation in the market to serve other utilities in the region with their excess power, prolonging the life of their assets, Clack previously said. The level of SEEM's control and independence remains unknown.

The recent analysis compares an RTO scenario in the region to what would happen if Southeast utilities continued with individual Integrated Resource Plans (IRPs), which do not allow for transmission expansion or coordination of distributed energy resources. An RTO would also reduce the energy export fee, known as wheeling charges, across state lines.

A business-as-usual IRP scenario in the region represents the highest costs in the analysis, followed by an economic IRP scenario, in which the model can choose a cost-optimal resource mix through a competitive procurement process within the service areas. The analysis includes an RTO with a nuclear scenario, which assumes existing nuclear plants receive license extensions through 2040. The RTO-plus-nuclear analysis includes greater emissions reductions with slightly less savings than the main RTO scenario.

SOURCE: Energy Innovation

The analysis shows that if an RTO keeps existing uneconomic nuclear plants online, emissions would drop 41% by 2040, from 2018 levels, compared to a 37% drop in emissions in the main RTO scenario. RTO-plus-nuclear would cost 0.5% more, leading to a cumulative $375 billion in savings by 2040, as opposed to $384 billion.

"We do see job gains in all four scenarios that we model, but the employment benefits are far more striking in the RTO scenario," Taylor McNair, program manager at GridLab and co-author of the policy recommendation, said during a press briefing.

Prolonging nuclear plants with programs such as zero emissions credits in Illinois, New Jersey and New York, would further decrease gas generation in the region, the report said.

The analysis is coupled with a policy recommendation to advance RTO considerations in the region, separately from the utility-driven energy imbalance market efforts reported earlier this summer.

The policy recommendations direct state legislatures and regulatory bodies to study the feasibility and benefits of power market reforms, including RTO scenarios. North Carolina has done that and South Carolina is planning to open up an investigation.

"The legislature has been seen as the body that will probably take action" on studying different market structures, said Bryn Baker, policy innovation director for the Renewable Energy Buyers Alliance, during the press briefing.

In addition, the policy recommendation guides states to support utility decarbonization goals. Many states in the South do not have their own clean energy goals established. The guideline from Energy Innovation, Vibrant Clean Energy and other contributors to the analysis, like GridLab, also highlights a state legislator and regulator role in managing the transition away from coal assets. Per the RTO scenario in the analysis, coal would be phased out by 2040, leaving 51% clean electricity generation with natural gas combined cycle assets remaining in the mix.