Competitive Electricity Markets and Innovation

Posted on February 24, 2011. Filed under: News | Tags: , , , , , , |

A few of us from Clean Currents metroed down to Capital Hill this afternoon to attend the COMPETE Coalition’s briefing on competitive electricity markets and innvoation.  The speakers discussed a recently published white paper by KEMA on the subject. The main conclusion of the paper is that three main elements of competitive markets drive innovation:

  1. Fair market rules that foster competition and allow entrepreneurs to participate.
  2. Accessibility to markets for new participants that can meet evolving customer needs.
  3. Risk and reward dynamic that incentivizes entrepreneurs to take risk in hopes of making a profit.

In the discussion of these three elements, speakers from several companies that are living proof of competitive markets encouraging innnovation took the stage.

Allen Freifeld, a Senior VP of External Affairs for Viridity Energy spoke about a project his company is working on with the Southeast Pennsylvania Transportation Authority (SEPTA- Philly’s version of WMATA) to harness the electricity generated when trains brake. Currently, this electricity is not being utilized in the SEPTA system. Viridity Energy will use battery technology to store this electricity and work with SEPTA to determine the optimum use for it at any given moment. The options include selling it into various PJM markets (PJM is the regional transmission organization or electricity market that our area is part of ) or keeping it for use within the SEPTA system. This stored electricity provides the valuable service of regulating the frequency of the PJM system and makes the whole thing run more efficiently. Efficient operations can lower the carbon footprint of the region’s electricity usage while at the same time, saving SEPTA millions of dollars annually.

Viridity Energy is able to provide this service because market deregulation has seperated out the various components of electricity supply into seperate competitive markets. These markets, under the auspices of clear rules established by PJM and FERC, allow entrepreneurs to address very specific challenges . This allows them to be nimble and flexible in dealing with problems.

Gene Hunt, Director of Communications at Beacon Power, compared the small suppliers’ felxibility to steering a powerboat, while operating an intergrated utility is more like navigating a giant freightliner. The small suppliers can quickly adapt to changing situations while utilities are often one or two steps behind of what is actually happening. Beacon Power is also working in the storage field and has recieved a Department of Energy Loan Guarantee to implement its flywheel technology as an alternative to battery-based short term storage. Flywheels utilize magnets and can harness excess electriticity (acting like load) or release it to the grid (acting like a generator), just like batteries. Under the Massachusetts RPS, flywheels can even earn Renewable Energy Credits by helping reduce the need for fossil-fuel balancing resources.

Technologies that can help balance and regulate the grid are becoming more and more important as renewables enter the picture. Since renewables produce electricity intermittently (the wind is not always blowing), batteries and flywheels are necessary to keep the system in balance. Balancing technologies have great potential to optimize electricity consumption and eliminate inefficiencies.

These innovations hold promise for the future of electricity. However, as the moderator of today’s event, William Massey, former FERC Commissioner and Counsel to the COMPETE coalition pointed out, these technologies will take time to implement and get right. There will be a degree of experimentation and adaptation along the way. With competitive electricity markets provide a stable climate for entrepreneurs, innovations will continue to improve the way we use electricity.

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