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United States

United States: Consolidated market for mid-America

UNITED STATES: Regional transmission organisation Southwest Power Pool (SPP) is working to improve grid efficiency and develop new energy markets as it braces itself for an influx of new wind generation within its mid-American district, which includes all of Kansas and portions of seven other states.

SPP's initiative, expected to be operational by March 2014, will consolidate its 15 separate balancing areas into a region-wide balancing authority. The new body will expand the electricity network to take in a much larger area and a greater number of energy consumers.

Another aspect of SPP's grid upgrade will be a day-ahead market to optimise generation choices by determining which power plants throughout its region should operate the next day - rather than letting individual utilities choose their own generation. Market participants will offer electricity for sale or make bids for purchase. Costs will be reduced throughout the market because fewer generating units will be needed on standby.

These changes will help SPP replicate improvements achieved by North America's other regional transmission organisations and independent transmission operators, which have already consolidated their balancing areas and created day-ahead markets.

"I don't want to criticise SPP because the important thing is that they're doing it," says Michael Goggin, manager of transmission policy at the American Wind Energy Association. "They've been working at this for a while and have already taken steps to achieve some benefits, but now they're going all the way."

SPP has signed a memorandum of understanding with two regional organisations that have already taken the plunge, PJM Interconnection and Electric Reliability Council of Texas (Ercot).

"What we're looking for from Ercot and PJM is their experience and knowledge in operating similar markets - and to transfer that knowledge to our staff," says Richard Dillon, director of market design at SPP. "We'll also see the analysis by which they determine that the market is operating efficiently."

To illustrate the benefits of SPP's initiative, Dillon compares its existing system to the morning commute: workers choose the cheapest means of getting to the office - but do so individually, unaware of savings available through sharing. "So everybody's got their own car, and that's the situation we are in right now with the utilities - they don't know who else is driving into an area. But if they had access to a carpool that didn't inconvenience them, reduced congestion and saved money, they'd take advantage."

The initiative is expected to cost roughly $100 million, with much of the money earmarked for custom software and related computer programming. Annual net benefits are estimated at $45-$100 million, depending on natural gas prices.

Currently, SPP has 4GW of wind in service within its territory and 28GW in various stages of development. The region is home to 60-95GW of wind power potential, according to a recent study by the National Renewable Energy Laboratory.

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