Southwest Grid Operator Expands into the West

The Southwest Power Pool (SPP) is making history by becoming the first regional transmission organization (RTO) to operate in both the Eastern and Western Interconnections of the U.S. power grid. This expansion, approved by the Federal Energy Regulatory Commission (FERC), will significantly reshape the energy landscape, offering enhanced grid reliability, cost savings, and better integration of renewable energy resources.



Enhanced Grid Reliability and Efficiency

The integration of the Eastern and Western grids under SPP RTO will create a more robust and reliable system. By leveraging geographic diversity, the expanded SPP can better manage supply and demand imbalances, reducing the risk of outages. This is particularly important as the region transitions to more intermittent renewable energy sources like wind and solar. For instance, balancing Wyoming wind with Southern Colorado solar will help optimize the use of renewable resources and support the ongoing clean energy transition.

Economic Benefits and Challenges

The expansion brings both economic benefits and challenges for utilities and consumers. On the positive side, the consolidation of resource planning across a larger footprint will lead to improved market efficiency and cost savings. SPP projects close to $50 million in savings for new and existing members, a significant economic benefit that can be leveraged to improve the financial health of participating utilities.

However, the transition to the new system will not be without its challenges. Participants will need to adapt to a much more complex settlement process, with the number of charge codes increasing from just five in the current Western Energy Imbalance Service (WEIS) market to over 100 in SPP RTO. This will drastically increase the volume and complexity of settlement activities, requiring utilities to invest in training and adaptation.

Facilitating Renewable Energy Integration

One of the most significant benefits of the SPP expansion is the better integration of renewable energy sources. By expanding into the Western Interconnection, SPP will be able to minimize renewable curtailments through geographic diversity. This will help support the ongoing clean energy transition in the region, as renewable energy sources such as wind and solar will be better integrated into the grid.

Market Dynamics and Competition

The expansion will also introduce new workflows and a comprehensive day-ahead market, which will require participants to adapt to a much more complex system. This will introduce new opportunities for utilities, traders, and grid operators, enabling market designs that align with the unique needs of one or more geographic regions and providing opportunities for all to benefit.

Conclusion

The expansion of the Southwest Power Pool into the Western Interconnection is a significant development in the U.S. energy landscape. While it presents challenges such as increased complexity in settlements and high setup costs, the benefits of enhanced grid reliability, cost savings, and better integration of renewable energy make it a worthwhile endeavor. By adopting mitigation strategies such as adaptation and training, strategic planning, and collaboration, utilities can leverage the benefits and overcome the challenges posed by the expansion.