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The Creation Of Seem

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Patrick McGarry's picture
Senior Director / Customer Success, PCI

Patrick recently joined PCI as a Senior Director in May, 2019. He owns over 32 years of experience in commodity trading and owns an extensive record working closely with energy market...

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  • Nov 4, 2021
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This blog post will cover the importance of regional alliances in energy markets and the core reason driving the recent creation of the Southeast Energy Exchange Market (SEEM).

Introduction

People support what they help to create.

What does that statement have to do with solving complex energy market challenges?

Everything.

We often get too consumed with the “how” we do things in today’s world and forget about the “why” we initially choose to do them.

We also tremendously discount the power of relationships.

Regional challenges require regional solutions created by authentic consensus from a group of stakeholders facing a common challenge.

Southwest Power Pool Story

Many years ago, I was fortunate to be exposed to the creation of SPP’s imbalance market and eventual Integrated Marketplace.

I don’t remember the hundreds of hours of debates about “how” these markets should and would operate from that time in my career.

However, I do recall the fantastic job of SPP leadership to explain “why” the organization began in the first place.

It is a story worth repeating here.

The United States was attacked at Pearl Harbor on December 7th, 1941. The nation was nowhere near ready to fight a world war, and the immediate need was clear.

We needed to create steel and aluminum to build boats and planes.

Lots of them.

WWII Planes

SPP began in 1941 when 11 regional power firms pooled their resources to keep Arkansas’ Jones Mill running 24 hours a day, seven days a week, to fulfill crucial national defense needs.

SPP’s Executive Committee chose to keep the organization after the war to ensure energy reliability and coordination.

As the folks in the SPP Little Rock headquarters like to say, “Eight decades later, SPP still reflects our early principles of collaboration in the interest of providing a critical service for the good of our region. Our vision is to lead our industry to a brighter future, delivering the best energy value.”

The trust of time-tested relationships forged in the survival of our nation allowed SPP to integrate more wind than anywhere else in the past twenty years and the transmission build-out to go with the expansion.

Has it been perfect? No.

Has it been effective? Extremely

Southeast Exchange Energy Market (SEEM)

The Clean Power Plan was a strategy announced by the Environmental Protection Agency (EPA) in June 2014 as part of the Obama administration’s efforts to counteract climate change.

Each state was given a specific objective for lowering carbon emissions, which they may achieve in any way they saw fit, but the EPA might intervene if they failed to submit a plan.

Not surprisingly, each state and each region took different approaches towards meeting the plan’s requirements.

Wind Farm

The Southeast decided to build nuclear power plants, wind farms, and a tremendous amount of utility-scale solar power.

When you consider the amazing population growth of the southeast during the past twenty years and the changing load profiles, you can begin to consider “why” a group of energy companies decided to meet and discuss how to integrate renewable energy best, maintain grid reliability, and keep power affordable for the region.

The integration of solar power in the Southeast poses unique regional reliability challenges associated with operating the power grid.

Without getting into the science and electrical engineering details in this post, let’s say the heat and humidity cause uncertain summer storms and often increase the intermittency of solar generation due to hard-to-predict cloud formations.

While technology is helping to address these challenges today and tomorrow, the bottom line is that maintaining grid frequency at 60 hertz (Hz) as reasonably as possible can be extremely challenging at times.

Balancing load and generation in the Southeast have some unique characteristics and challenges than other regions of the United States.

In the Southeast, wind and solar resources are quickly developing.

What is the core reason for the creation of SEEM?

It is reliable integration of a rapidly growing fleet of renewable generation.

Different Strokes For Different Folks

In 2007, I moved my family to the Pacific Northwest to assume a leadership position with my energy company.

Pacific Northwest

I think it took me about one month of meetings to quickly realize that I was now living and working in a region that thought about energy issues entirely different than my previous experiences.

What did I hear most often?

“Regional challenges require regional solutions.” “We do not want a costly bureaucratic organization with a top-down approach infringing upon our ability to gain consensus with our neighbors.”

Sound familiar?

Earlier this year, Tony Clark and Vince Duane published a white paper, Stretched to the Breaking Point-RTOs And The Clean Energy Transition. They challenged what they called “the prevailing orthodoxy … that the road to the decarbonized, advanced technology grid of the future goes through a Regional Transmission Organization.”

Last July, Tony Clark co-authored an articleIt’s time for emergent markets to take center stage in non-RTO regions of the country.

According to Clark, the emergent markets bring three qualities any market needs:

  • Simplicity
  • Adaptability
  • Stability

The projected Southeast Energy Exchange Market (SEEM) in the Southeast United States fits neatly with the Western Energy Imbalance Market’s (EIM) progressive evolution. Both represent the efforts of local stakeholders who see benefits for customers, utilities, and the region with an evolutionary, adaptive model that enhances the ability to buy and sell power.

Conclusion

The only Latin words that I have remembered from the many attempts by teachers throughout my educational career were those engraved on my Chaminade High School class ring.

Fortes in Unitate.

Strength in Unity.

If you never lose focus on “why” your organization exists, especially a joint action type of business model, the “how” you achieve your objectives becomes easier because you have strength in unity.

That strength allows necessary spirited discourse and debate on the “how” and to consider the viewpoints of many stakeholders.

Organizations that lose the focus on “why” your organization exists permanently lose their luster and eventually wither on the vine.

It’s a key reason why companies should continue to focus on retaining their veteran staff because they can be a critical bridge to ensuring the core history of the organization is never forgotten.

The SEEM market exists because a regional group of entities faces a common challenge to cost-effectively and reliably integrate a rapidly growing renewable energy.

Energy Grid

Emerging markets should be embraced as a reasonable, realistic choice for specific locations, and policymakers should embrace them as a promising new model for the future of the U.S. grid.

Regional challenges require regional solutions.

This article first appeared here: 


PCI recently completed a well-attended webinar about how to maximize asset profitability in SEEM. Click below to request the slide deck.

Request SEEM Webinar Slide Deck 


References:

Discussions
Matt Chester's picture
Matt Chester on Nov 4, 2021

The projected Southeast Energy Exchange Market (SEEM) in the Southeast United States fits neatly with the Western Energy Imbalance Market’s (EIM) progressive evolution. Both represent the efforts of local stakeholders who see benefits for customers, utilities, and the region with an evolutionary, adaptive model that enhances the ability to buy and sell power.

The Western EIM seems to work well-- are there going to be any key differences with SEEM? Any lessons learned that might be tweaked for this new region? 

Rao Konidena's picture
Rao Konidena on Nov 4, 2021

Matt

Here is a list of all the RTO functions from PJM, https://www.pjm.com/-/media/about-pjm/newsroom/fact-sheets/pjms-role-as-an-rto-fact-sheet.ashx 

You will notice SEEM proposal misses out on a lot of those RTO functions like market monitoring, ancillary services, real-time and day-ahead markets, independent governance, and others. But you would argue SEEM didn't apply to become an RTO. And I would argue against using the word "market" in SEEM because it is a bilateral market for southeast utilities to enter into contracts with each other for renewable energy.

Now, your question about Western EIM and the thesis that it is working well. Western EIM has independent governance from what I can tell. The devil is in the details such as the CAISO Board of Governors appointed by the CA Governor.

Finally, SEEM or even Western EIM do not go as far as RTO. Yes, RTOs took time and they are still a work in progress.

Bob Meinetz's picture
Bob Meinetz on Nov 4, 2021

"Western EIM has independent governance from what I can tell. The devil is in the details such as the CAISO Board of Governors appointed by the CA Governor."

I would disagree with your assessment, Rao. CAISO's Board of Governors, like the California Public Utilities Commission, is required by law to act independently from the Governor's office. Yet it shows every indication of being under the governor's thumb in policy decisions, and doesn't disclose conflicts of interest which would severely compromise that independence.
The Western EIM is currently being used to greenwash California's power mix. CA utilities are allowed to categorize up to 50% of their generation as coming from "unspecified sources", and there's plenty of evidence to suggest California is exporting its emissions by buying power from coal and gas plants in other western states.

Rao Konidena's picture
Rao Konidena on Nov 4, 2021

I encourage you all to read the sitting FERC Commissioner's statements on SEEM.

SEEM came into play only because the vote was tied 2-2, 2 in favor, and 2 against. The 5th FERC Commissioner is yet to be seated.

Specifically, "I am concerned that the Southeast EEM may expose Participants to unjust and unreasonable rates." https://www.ferc.gov/news-events/news/commissioner-clements-fair-rates-act-statement-southeast-eem-seem

Also, Chairman Glick here, "From my perspective, utilities and other stakeholders in this region should be working to establish an RTO/ISO in the Southeast for the benefit of consumers and to promote grid reliability.  But that is not the proposal presented to us in this docket. " https://www.ferc.gov/news-events/news/chairman-glicks-fair-rates-act-statement-southeast-eem-seem

Patrick McGarry's picture
Patrick McGarry on Nov 4, 2021

Rao- Appreciate the feedback. I also encourage you to read the comments from FERC officials earlier this week while on a call for the western markets. My point is simply that RTO markets are not a one size fits all. People will support what they help top create. Nobody is dictating a top-down solution out west because they know they will not get the support. Stakeholders need time and discussion to work together and get to where they need to be.

Rao Konidena's picture
Rao Konidena on Nov 5, 2021

Patrick - can you please share the link about what FERC officials said regarding western markets. Thanks Rao

Patrick McGarry's picture
Thank Patrick for the Post!
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