North American Wholesale Electricity Markets Trend

December 5, 2022
John Dalton

An important trend in North American wholesale electricity markets in 2022 was the expansion of these markets to facilitate the integration of variable output renewable resources. The figure shows the current footprint of organized competitive wholesale electricity markets and illustrates the geographic gaps. Fortunately, these gaps are being addressed. On November 30th, the Southwest Power Pool (SPP) shared its proposal (Markets+) to develop an energy market (day-ahead, real-time and flexibility reserves) for the West. Already, SPP has secured support from seven power suppliers in the Pacific Northwest including the Bonneville Power Administration who covers large portions of the region. SPP’s proposal is an alternative to the California ISO’s (CAISO’s) Western Energy Imbalance Market, which will have over 20 active participants as of 2023 and CAISO is proposing to expand with an extended day-ahead market. To the east, the Southeast Energy Exchange Market (SEEM) went live in November. SEEM supports inter-hour, bilateral trading, which allows participants to buy and sell power close to the time the energy is consumed, utilizing available unreserved transmission. While each of these wholesale market frameworks is different, they all share an objective of reducing the cost of balancing variances between load and generation. Importantly, these markets can significantly reduce the cost of integrating variable output renewables. Looking to the future, Nova Scotia recently enacted legislation that increases the scope of its wholesale market to allow hydrogen projects participate. A logical next step is to improve the functionality of this market by enhancing the fidelity of the price signal for imbalances.