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Competition can unlock the US clean energy economy

Expanding well-designed, organized wholesale electricity markets is fundamental to this future.

Electricity market concept art

Courtesy of Shutterstock/Art Stock Creative

The incoming Biden administration has set an ambitious target of carbon-free power production in the U.S. by 2035. Achieving this lofty goal will require a step-change in how this country plans and makes investments to modernize the nation’s electric grid. With the right policies in place, the clean energy economy also could be the cornerstone of the U.S. economic recovery.

The electricity sector, which will underpin the transition to a clean energy economy, is broken down into wholesale and retail electricity transactions. The former sells power between generators and electricity providers, and the latter between electricity providers and customers. Wholesale electricity markets facilitate competition between independent power producers and non-utility generators to generate power and are a critical path to economic benefits for consumers, clean energy integration and an accelerated transition to a zero-carbon future.

Two-thirds of the U.S. (see figure below) already sees economic and environmental benefits from competition between power generators through centrally organized wholesale power markets run by nonprofit interstate grid operators. For example, the PJM Interconnection provides over $3.2 billion in annual savings to over 65 million customers and reduces carbon emissions by 10 million tons per year.

REBA wholesale markets chart

Beyond cost savings and clean energy deployment, 80 percent of the 30 gigawatts of bilateral corporate power purchase agreements to date have occurred in organized wholesale markets because they provide large energy buyers with the ability to directly meet their demand for clean energy. It also turns out that 80 percent of all wind and solar capacity has been added in states that are part of these wholesale markets, demonstrating their crucial role in facilitating new, clean energy integration.

The Renewable Energy Buyers Alliance (REBA) represents businesses from all sectors of the American economy — collectively they generate over $4 trillion in revenue. Guided by ambitious corporate climate and clean energy goals, often for 100 percent renewable energy, REBA’s members are energy customers that need the option to choose clean energy to power their factories, businesses and warehouses.

Beyond cost savings and clean energy deployment, 80% of the 30 gigawatts of bilateral corporate power purchase agreements to date have occurred in organized wholesale markets.

These businesses — with footprints in communities all across the country — have come together to call for well-designed wholesale markets as the most important pathway to enable the clean energy technologies of the 21st century. Wholesale markets allow for other important benefits; competition between resource owners drives innovation and creates the playing field for tech-enabled clean energy resources such as demand response and distributed energy resources. The opportunity to drive clean energy by customer demand is substantial: A recent study estimates that unmet renewable energy demand from the largest companies in the next 10 years alone is 85 GW, but the ability to fulfill that demand is challenged by market structures.

So what is the actual potential of forming wholesale markets where they don’t yet exist?

An Energy Innovation report finds that extending wholesale markets in the Southeast, for example, could deliver cheaper, cleaner and more reliable electricity across the region, reducing customer bills by 23 percent and slashing emissions by 37 percent, while creating at least 285,000 new jobs by 2040. In the West, one recent study found that a full regional transmission organization could save customers $1.2 billion a year.

That is why REBA’s members know we need to modernize our electricity system to power our nation’s economic recovery, spur innovation, generate well-paying jobs and build an affordable and reliable clean energy future. Expanding well-designed organized wholesale electricity markets is fundamental to this future and will deliver benefits to Americans all across the country. 

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