Energy markets beat storage as Colorado utilities decarbonize

By Allen Best

Big Pivots

A long-awaited report commissioned by the Colorado Public Utilities Commission confirms what executives of many of the state’s utilities have been saying: Colorado needs to be part of an organized market for electricity.

The study, which was conducted by Siemens and posted June 11, said that as utilities continue to add renewables in line with the state’s goals of 80% by 2030, they will have to invest much more heavily in storage in order maintain reliability of electrical supplies.

But storage capacity will be less, according to the study, if the utilities join regional markets that allow sharing of electricity resources across much broader geographic areas. And this will mean cost savings for the utilities and their customers.

The Siemens report examined four market alternatives, but concluded that the cost savings would be greatest through larger regional market participation in a regional transmission organization, or RTO.

This report’s conclusions echo statements made by executives of several utilities in Colorado. To achieve deep, deep decarbonization, they have said, will require creation of broad markets, especially an RTO. Colorado’s largest utility, Xcel Energy, has resisted.

“A transition to a clean generating portfolio of primarily intermittent resources carries with it a requirement to ensure energy sufficient, generally using battery energy storage systems,” says the report in its conclusion. “Colorado can benefit from a reduced need for energy storage systems with participation in larger markets.”

This gets wonky to the X degree. It’s not an easy story, like shutting down Coal Plants X and Y. But architects of Colorado’s strategy to reduce emissions are in almost complete agreement that this is terribly important stuff. If you care about climate change, bear with me.

The report was triggered by state legislators in 2019. That session’s takeaway energy and climate legislation established economy-wide decarbonization goals, including 50% by 2030. Additional laws adopted that session were complementary, including the Colorado Transmission Coordination Act. The law directs the Public Utilities Commission to evaluate participation of Colorado utilities in:

energy imbalance markets;
RTOs (regional transmission organizations);
power pools, or
joint tariffs.

This report sets the stage for public testimony, as required by the 2019 law. The hearing is scheduled for Thursday, June 24th, from 9 a.m. to 5 p.m. Once again as per the law, the utility commissioners must issue a ruling no later than Dec. 21 whether participation by utilities in these markets are in the public interest.

This is from Big Pivots No. 40 (June 18, 2021), an e-journal chronicling the energy transition in Colorado and beyond.

If the PUC decides yes, it is in the best interests of the public for utilities to join one of these market types, the commissioners shall direct utilities to take appropriate action in that regard.

It’s useful to look back to 2019 and also to the 2021 legislative session.

First the prelude: utilities had been meeting for some time in 2017 and 2018 as part of the Mountain West Transmission Group. Xcel Energy pulled out in 2018, dooming the effort.

In 2019, Tri-State Generation & Transmission and its partners, most notably the Western Area Power Administration, forced the issue by going in with the Southwest Power Pool to start an energy imbalance market among primarily Colorado and Wyoming utilities. This is best understood as a baby step.

Xcel Energy and partnering utilities along the Front Range partnered with an energy imbalance market aligned with the California-based CAISO, or California Independent System Operators.

Colorado Springs aligned with the latter at first but has since switched to the former, i.e. Southwest Power Pool.

Now comes a bill, SB21-072, from the recently concluded legislative session. The bill will be easily overlooked in the arcane world of energy and climate legislation. It creates a state electric transmission authority, an agency that will be sort of the overseer of new electric transmission. In effect, it will force Xcel and other utilities to work together, with the intent of doing what is best for Colorado altogether. The interests of the individual utilities and the state can coincide, but not necessarily so.

The bill also sets a deadline for utilities that own and control transmission facilities to join an organized wholesale market. The original bill language said an RTO. This definition leaves the door open for something else.

Notable are the prime sponsors of this bill: State Sen. Chris Hansen and Rep. Jerry Valdez, both Democrats from Denver with deep backgrounds in energy; and also two Republicans, Sen. Don Coram and Rep. Marc Caitlin, both members of the Delta-Montrose Electric Association, the cooperative that broke away from Tri-State, partly in a dispute about the cost of electrical transmission.

Look for more about SB21-072 in the next issue of Big Pivots.

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