RTO Governance: An Emerging Tool to Meet Decarbonization Goals
Regional Transmission Organizations or Independent System Operators (RTOs/ISOs)1 operate the organized wholesale energy markets that are essential to unlocking a cost effective, rapid, clean electricity transition for all customers. RTOs can provide participants billions in benefits by:
- Improving efficiency through centralized least-cost dispatch of generation resources,
- Reducing capacity needs and improving reliability through pooling resources,
- Operating competitive wholesale markets that drive innovation and provide customers with greater choice,
- Bettering renewable energy integration by balancing across wider geographic areas, and
- Facilitating cost effective transmission expansion.
Successfully navigating RTO governance structures is key to achieving decarbonization efforts because governance decisions shape market performance and benefits. An RTO’s governing body determines which stakeholder concerns are addressed, how issues are resolved, and how rules and operating procedures are designed. Stakeholders are increasing their involvement in RTO decision-making as industry experts acknowledge that these markets are instrumental in achieving a zero-carbon future.
The energy customer voice needs to be present in RTO governance to ensure an RTO’s market design accelerates grid decarbonization and benefits flow to the end-use customer. There are several barriers that can limit large customer engagement in RTO stakeholder processes, including a lack of customer education. Each RTO has a unique stakeholder process that allows customers to weigh in and make proposals. Learning the ins and outs of RTO governance can help renewable energy customers participate in stakeholder processes and champion decarbonization.
While stakeholders continue to engage in existing markets, there is growing momentum to expand RTOs into areas where this level of regional coordination is absent. In the West, the Southwest Power Pool (SPP) is developing a proposal to operate a market called “RTO West” by 2024. Similarly, CAISO has continued to build out its Energy Imbalance Market. At the state level, Colorado and Nevada have enacted laws requiring utilities to join RTOs by 2030. The expansion of well-designed and implemented organized wholesale markets is imperative to reach zero-carbon targets, and requires the customer voice be incorporated into decision-making. Understanding the landscape of existing governance mechanisms is fundamental for energy customers evaluating proposed governance structures and mechanisms proposed within new markets.
For energy customers and other stakeholders looking to learn more about the basics of RTO governance, the Clean Energy Buyers Institute’s U.S. Organized Wholesale Electricity Markets Governance Primer is an educational resource that introduces key governance elements and foundational concepts necessary to understand and engage with RTOs. The Primer covers how each RTO manages and changes market rules and operations as well as how customers can participate in stakeholder processes. Acquiring knowledge on decision-making processes allows energy customers an opportunity to engage and provide input on decisions that could impact their renewable energy goals. Elevating the customer voice within dialogues on proposed governance in new markets is also key to accelerating the clean energy transition in those regions.
1Though there are some small differences between an RTO and an ISO, the terms are often used interchangeably. Here both entities are referred to as RTOs for simplicity.