By Nick Fitzmaurice
Previous Down to Earth issues have explored key transformations that must be achieved as part of decarbonizing local and global energy systems to address the climate crisis: electrification of end-use energy, electricity decarbonization, demand side management, and electric transmission infrastructure expansion. This final installment explores the essential role that energy markets will play in ensuring the affordability and reliability of Montana’s clean energy future. For a consolidated version of these articles, visit MEIC.org/resources.
Lay of the Land
Regional energy markets are essential to a reliable and affordable electricity system. These markets also require investment in an electric transmission system that has largely been ignored for half a century. While transmission lines are the physical infrastructure that connects the grid system and delivers electricity from power plants to demand centers, energy markets dictate how these power transfers occur.
Electricity currently moves throughout the western electric grid based on a clunky and inefficient patchwork of individual transmission operators. A modernized and coordinated electricity market in the West will allow better interregional coordination for more optimal electricity generation and consumption by prioritizing electricity from more affordable power plants to boost the grid’s reliability.
Other areas of the country already engage in coordinated energy trading systems within a larger geographic area than is covered by a single utility. These systems, generally termed independent system operators (ISOs) or regional transmission organizations (RTOs) don’t exist in most of the West. There is a strong push to create such an entity in the Western U.S. to allow utilities to take advantage of the tremendous geographic and weather diversities, and use the best available electricity resources at any given time. A step in the right direction has been the formation of a rudimentary Western market called the Western Energy Imbalance Market (EIM). The EIM allows participating utilities to trade electricity with other utilities on a short-term basis (an hour ahead) to meet spikes in demand or to sell excess power. Since 2014, the EIM has grown to include 22 participants (including NorthWestern Energy) which have realized over $6.25 billion in benefits. NorthWestern Energy joined the EIM in June 2021 and had already seen benefits of more than $107 million by the end of September 2024.
The EIM helps western utilities trade electricity, but the current system is clunky and inefficient, causing exorbitant short-term energy prices during high-demand periods. NorthWestern Energy often construes high market prices as a reason to build more expensive generation infrastructure in Montana, when these prices really indicate the need for more advanced market systems and transmission upgrades. We need a larger organization that oversees the electric grid, expedites upgrades to an aging and inadequate transmission system, and ensures electricity is used more efficiently and affordably.
Regional Demands
Trading electricity across a greater geographic region boosts reliability and affordability by diversifying the available resources at a given time. While the wind doesn’t always blow in a given location, it’s almost guaranteed to be blowing somewhere else in the West. Instead of firing up an expensive in-state gas plant when the wind dies down, utilities can import cheaper renewable energy to meet that need. For example, the wind in Montana is most productive in winter months when coastal states have the highest demand for electricity, while the wind in Washington and Oregon is strongest during summer months when other states have a higher demand for electricity. Similarly, solar generation differs regionally depending on time of day and cloud cover, creating further opportunities for benefits in a connected region. In the January 2024 cold weather event in this region, it was solar electricity from the Southwest that kept the power on in the Northwest, thanks to trading enabled by the EIM. Sharing electricity resources across a greater area allows electricity to be used more efficiently and affordably.
Trading only an hour in advance is just the start, leaving room for further efficiencies and cost savings with longer trading horizons. Utilities, regulators, and advocates across the West are working to improve the electricity trading system through the creation of a market to allow trade commitments a day in advance. Two competing markets are in development to meet this need, with the Extended Day Ahead Market (EDAM), operated by the same entity that operates the EIM, presenting the clearest path towards unifying the Western electric grid under a single market structure. A single, west-wide market structure would allow the most efficient and cost-effective trading of electricity resources. EDAM has already been approved by the Federal Energy Regulatory Commission and will be onboarding participants by 2026. Many EIM participants have already committed to joining the EDAM. A more formally organized RTO would be the final market evolution in the West and would most optimally and cost-effectively coordinate power generation, transmission planning, and power sharing across the West. The formation of an RTO, something most of the country already has, is still many years away.
Myths and Misconceptions: No Nuclear
Nuclear electricity generation will not be part of a rapid, affordable clean energy transition. This is the most expensive form of electricity production, relying on underperforming technologies that could not be deployed in time for their carbon reduction benefits to mitigate the impending climate crisis. When these plants have been built at all, projects exceed initial budgets by billions of dollars and are completed years behind schedule, if at all. In some cases, cost overruns have saddled ratepayers with decades of extraneous expenses for canceled projects that never produced electricity. Uranium mining is a highly polluting process that is disproportionately harmful to Indigenous communities. And with no national repository, highly radioactive spent nuclear waste is stored on-site in “short-term” storage and will likely stay there for hundreds or thousands of years, risking environmental contamination from geopolitical instabilities and natural disasters. With the economic challenges, environmental damages, and social injustices propagated by uranium extraction, there is a strong case against nuclear.
Nuclear weapons and nuclear energy programs are closely related, with shared technology, expertise, and funding (ratepayer and taxpayer subsidies). For example, both programs of U.S. government are housed within the Department of Energy. While the national fervor around nuclear rages on, last year’s failed pilot project for NuScale Power’s Small Modular Reactor (SMR) in Idaho Falls – the only SMR design licensed by the Nuclear Regulatory Commission – is yet another indicator that wasted investments into nuclear are directing funds away from where they can truly impact the energy transition.
This article was published in the December 2024 issue of Down To Earth.
