Trade Electricity Like Pork Bellies
Mar 23, 2009 - Ben Paynter- Wired
Regional brokers are responsible for getting enough
electrons to their designated areas. At times of peak
usage, that means firing up an old, dirty generator
(not exactly green) or importing more juice from outside
the region (not exactly cheap). Eventually, someone
has to build more power plants and infrastructure
Treat electricity like a commodity—something for
which you can gauge demand and set a price in advance.
That's what New England's independent system operator
started doing last year. In its Forward Capacity Market,
the ISO projects how much power the region will need
three years ahead and then runs a descending-clock
auction for the right to provide it. The ISO doesn't
care whether it gets its power from increased production
of megawatts or from efficiencies added to the system,
so-called negawatts. The agency simply sets the starting
price. Result: money saved in power plants and wires,
more stable electricity bills, and a homegrown incubator
for getting bright green ideas off the drawing board.
The independent system operator announces its need
for 32,305 megawatts. Hundreds of wannabe providers—generators
and conservers—offer 6,850 MW more than the ISO wants.
The auction opens at $15/kW-month.
With excess supply, the ISO brings the price down
to $9/kW-month, then $8, and so on, shedding bidders—and
surplus power—with every round.
End of the auction: The ISO reaches $4.50 ... and
still has excess electricity, which it offers to take
off the providers' hands as well.