by Steve Nelson
Over the decade, only one competitive wholesale power plant has come online in West Virginia, with one other being transferred from its regulated status to an exempt wholesale generator.
As older utility-owned plants have retired, these two independent power generators have been very effective in providing cleaner, more reliable and cost-effective power without passing along the up-front construction costs to ratepayers. Independent Power Producers power plants, like Longview Power, sell their power to the regional transmission organizations, where the marketplace decides contracts, and competition ensures better prices for end users.
West Virginia has benefited tremendously from being one of 13 states that make up the PJM Interconnect (“the grid”), the largest marketplace for electricity in the world. With vision, West Virginia could enhance its position as a net energy producer to those other states in the PJM that want renewable sources of power but have not guaranteed reliability, resilience or affordability.
Power flows between state lines within the PJM. Some states produce more than they need and others not nearly enough. But with planning and management, the entire region has reliable electricity at affordable rates, all while seeing tremendous declines in emissions over the last few years. However, because of the inability of intermittent resources to dispatch 24/7, this “balancing” across PJM may be threatened.
Prior to competitive wholesale generation, power plants were part of vertically integrated utilities, which produced the power and sold it in a regulated monopoly system that worked somewhat well for many years. However, as those original utility power plants began to age out and new ones were needed, the value of competitive wholesale generation became much more attractive. Additionally, both new technology for all fuel types and IPP’s ability to quickly and effectively design, build and operate have made the U.S.’s generating fleet cleaner, more efficient and thereby lowered costs for everyone.
America was built on competition and the marketplace. PJM takes the best parts of that competitive market structure and adds in a safety net, which guarantees the ability to dispatch at a certain level. Severe penalties are applied to those who may not meet the requirements and timeframes.
PJM also ensures that power providers are properly weatherized so that they can meet demand when called upon. Had this type of system been in place in Texas earlier this year, the blackouts experienced there during the freeze would have been a lot less likely. Intermittent resources in Texas have been incentivized through subsidies and thus have flourished with little regard to power reserves also needed during extreme events, such as last winter’s headline grabbing cold snap. Since the regulated Texas utilities have backed away from generation, it is Texas’ IPPs that now have the expertise and capability to assure a reliable and economically viable power supply in their market, ERCOT.
West Virginia has always been an energy state. As of now, we export more electricity into the PJM than we need — but every year that margin decreases more and more as older utility-based power plants in the state have exceeded their useful life and been mothballed.
Meanwhile, neighboring states like Pennsylvania and Ohio have been adding numerous new wholesale power stations that flow into the PJM Interconnect and are seeing the benefits of billions of dollars of construction and the benefits of increased employment and economic activity associated with operating viable power plants in their states.
As West Virginia looks to the next generation of energy, it will be important for our policymakers to understand the benefits that wholesale power generators have created for everyone on the grid — in both lower costs and lower emissions. Markets reward innovation, and West Virginia has an opportunity to innovate its way to the future.
Steve Nelson serves as CEO of Longview Power after previously serving six years as chief operating officer. Nelson has over 40 years of industry experience encompassing key aspects of power plant operations.
