February 28, 2019

As it turns five, Southwest Power Pool’s Integrated Marketplace is saving billions and enabling big changes in energy dispatch

LITTLE ROCK, ARK. — On March 1, 2019, Southwest Power Pool marks the five-year anniversary of the launch of its wholesale electricity market, the Integrated Marketplace. Working in tandem with SPP’s other services, the Integrated Marketplace has produced the lowest wholesale electricity costs in the nation, saved SPP’s market participants cumulatively more than $2.7 billion and enabled access to renewables at a degree previously unimaginable, among providing other benefits to SPP’s stakeholders and the region as a whole.

“Over the five years since the Integrated Marketplace went live, it has consistently outperformed our expectations,” said Nick Brown, SPP president and CEO. “Our market has continually proven itself to be one of the wisest investments our members have made in terms of economic value to them and their customers and electric reliability across our 14-state region. It has also set us up for continued success well into the future.”

SPP launched its Integrated Marketplace on March 1, 2014, adding to its toolkit day-ahead generation dispatch, congestion management and real-time balancing solutions that would contribute to the organization’s two-pronged objective of ensuring electric reliability and affordability. Simultaneously, SPP consolidated 16 balancing authorities (BA) – regions for which it is responsible for balancing generation and load – into one. Together, the market and consolidated BA region equipped SPP to coordinate next-day generation across its footprint, providing its market participants greater access to energy reserves and more efficiently and reliably committing the lowest-cost available generation to meet demand.

Initial projections estimated the Integrated Marketplace would yield $100 million in annual net savings to market participants. In actuality, it has dramatically out-performed expectations, yielding an average of $570 million in annual savings derived from lowered production costs, reductions to excess capacity requirements and other efficiencies facilitated by SPP’s robust market processes. Cumulatively since its launch, the Integrated Marketplace has saved participants $2.7 billion. Based on calculations reported by the Federal Energy Regulatory Commission in October 2018, wholesale electricity prices in the SPP region were the lowest in the nation; SPP’s year-to-date spot power prices averaged $29/megawatt-hour (MWh).

SPP dispatches the most reliable and lowest-cost generation to meet load, remaining agnostic to fuel sources (i.e., SPP doesn’t favor fossil fuels, renewables or any other particular generation type over another). Thanks to several factors, though, the reliable dispatch of renewable energy to meet demand has seen a massive increase over the last several years in the SPP region. This owes to the consolidation of balancing authorities, which enables SPP to use its entire fleet of generators to serve load across its 546,000-square-mile service territory regardless of a particular generator’s location; the $10 billion investment in transmission infrastructure SPP has directed over the past decade, which allows SPP to move wind and solar power from where it’s generated to where it’s needed; and the Integrated Marketplace that facilitates the dispatch of a reliable mix of fuel sources minute by minute to meet load —  a mix that increasingly relies on low-cost wind and solar resources.

In 2008, wind energy made up just 3 percent of SPP’s annual energy production: about six gigawatt-hours (GWh) of the 176 GWh produced that year. In 2018, SPP produced 276 GWh of energy, of which wind made up 23 percent or 65 GWh. At a given moment, SPP has reliably met as much as 69 percent of its load with renewable resources and 64 percent with wind alone: a level that would have been unthinkable just a few years ago.

“The integration of renewable energy wasn’t among our stated objectives in implementing the Integrated Marketplace, but it has been a direct result of the market’s operation, the consolidated balancing authority and our member companies’ investment in modernizing the electric grid,” said Bruce Rew, vice president of operations. “A decade ago, serving even a quarter of our load with variable, renewable generation wouldn’t have been possible, but today it is almost a daily occurrence.”

SPP remains committed to the ongoing evolution of its market solutions, and it works with its members and market participants to constantly enhance its product offerings. Recently, SPP implemented changes to shortage pricing, the procurement of instantaneous load capacity in the day-ahead market and renewable-resource data requirements that improved SPP’s forecasting process. Today it is developing products to accommodate solar generation and energy storage resources — utility-scale batteries, for example, which will play larger roles in meeting demand as deployment costs fall — and to reward generators who can quickly ramp up or down to provide timely assistance in mitigating sharp load curves.

“SPP has always valued continuous improvement and a core belief that reliability and economics are inseparable,” Brown said. “Our Integrated Marketplace is a shining example of that commitment. It’s a milestone in our organization’s history, and it has wonderfully enhanced our ability to ensure electric reliability across our region while saving our stakeholders and their customers billions of dollars.”

About SPP: Southwest Power Pool, Inc. manages the electric grid and wholesale energy market for the central United States. As a regional transmission organization, the nonprofit corporation is mandated by the Federal Energy Regulatory Commission to ensure reliable supplies of power, adequate transmission infrastructure and competitive wholesale electricity prices. Southwest Power Pool and its diverse group of member companies coordinate the flow of electricity across 66,000 miles of high-voltage transmission lines spanning 14 states. The company’s headquarters are in Little Rock, Arkansas. Learn more at www.spp.org.

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Derek Wingfield, 501-614-3394, dwingfield@spp.org