5 Trends Transforming the US Energy Sector

by | Jun 24, 2015

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Sonia Aggarwal of research firm Energy Innovation posted on Utility Dive about five trends shaping energy markets today. Energy Innovation also curates the website for America’s Power Plan – a policy toolkit developed by over 150 energy professionals with the goal of promoting clean, affordable and reliable power.

Regional Markets

The western Energy Imbalance Market (EIM) has rapidly expanded across the West Coast and Southwest, as far northeast as Wyoming. Larger power markets are generally more efficient than small ones as they give buyers more flexibility in procuring power, and the EIM is expected to save customers between $72 million and $208 million per year.

The eastern half of the country has moved further toward full integration of regional energy markets in the markets overseen by regional transmission organizations (ERCOT, ISO-New England, MISO, NYISO, and PJM). This month, the COMPETE Coalition presented the findings of a NYISO report estimating that New Yorkers have saved a total of $7 billion since 2000 thanks to deregulation. Meanwhile, MISO estimated in February that it had saved its customers $2 billion in 2014 alone.

Performance-Based Utility Rates

Traditional utility rates are based strictly on a “cost-of-service” model whereby utilities are compensated directly for operating expenses and capital investments. Instead, the majority of utility executives in a recent Utility Dive survey now favor performance-based rates where their companies are compensated for achieving policy goals, such as meeting energy efficiency targets.

Distributed Resources

Falling solar and battery storage prices are driving an increasing number customers to invest in distributed energy resources. Utilities (and retail providers) are increasingly embracing these technologies in order to adapt to a changing energy marketplace. New York and California have been leaders in this space.

Flexible Market Structures

The article notes how California and Minnesota are moving beyond net metering toward policies and regulations that better value distributed resources, while Texas is taking steps to kickstart its distributed energy market. Retail providers are also playing their part in this regard by offering a wide range of pricing that gives customers greater flexibility in procuring their energy.

Regional Transmission Planning

The Federal Energy Regulatory Commission (FERC) issued FERC Order 1000, which expands the scope of regional transmission planning and cost sharing among transmission providers in different states. Regional transmission planning in turn allows power to travel longer distances, giving even greater flexibility to power buyers and sellers. Furthermore, as the American Wind Energy Association explains, this lays the groundwork necessary for more widespread wind power adoption.

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