The electric power system in the United States is a vast and complex network of generation, transmission and distribution that provides electricity to hundreds of millions of customers. In this System, RTO/ISO (Regional Transmission Organization or Independent System Operator) plays a crucial role.
An RTO/ISO is an organization responsible for managing the operation of the power system in a particular region. Their responsibilities include coordinating electricity supply and demand, managing transmission networks, ensuring the stable operation of the power system, and promoting competition and transparency in the electricity market. In the United States, there are several RTOs/ISOs that manage power systems in different regions, Examples include MISO (Midcontinent Independent System Operator), PJM (PJM Interconnection), ISO-NE (ISO New England), and so on.The power wholesale market is a crucial part of the power system, which ensures the effective trading and supply of power through a series of market mechanisms. The following is the basic operation principle of the wholesale electricity market:
First, electricity is generated by power plants that can generate electricity from a variety of sources, including coal, natural gas, nuclear, hydro, wind, and solar. These power plants are usually divided into dispatchable resources and non-dispatchable resources. Dispatchable resources such as coal, natural gas, etc., can adjust power generation according to market demand; As for undispatchable resources such as wind and solar energy, the power generation is affected by weather and other factors, which is difficult to adjust. Next, the electricity is transmitted through the transmission grid to the substation, where it is reduced by the transformer and then distributed to the end user. The transmission grid is made up of high-voltage transmission lines, substations and other facilities that carry electricity from power plants to various places.In the wholesale electricity market, RTO/ISO plays an important role. They administer market rules, develop market designs, execute trades, and supervise the behavior of market participants. The wholesale electricity market usually includes several markets such as day ahead market, real-time market and capacity market to meet the electricity demand in different time periods. In the day-ahead market, market participants submit their electricity demand and supply plans in advance. According to these plans, the market operator determines the price of electricity and the distribution scheme for each period. In a real-time market, market participants can trade electricity based on real-time demand and supply to meet sudden demand or short supply. In addition, the capacity market is a market established to ensure that the power system has sufficient backup capacity. Power plants and other resources can participate in the capacity market, providing backup capacity in case of emergencies. The operation of electricity wholesale market is based on supply and demand relationship and market rules. The price of electricity is determined by the relationship between supply and demand, the price is lower when the supply is sufficient, and the price is higher when the supply is insufficient. Market rules include trading rules, settlement mechanisms, market supervision, etc., to ensure that the market is fair, just and transparent.
Collectively, RTO/ISO and wholesale electricity markets together form the core of the U.S. electric power system, ensuring the efficient supply of electricity and the stable operation of the system by coordinating, regulating, and overseeing the electricity market.
Reference
“US Electricity Markets 101” by Resources for the Future (RFF): https://www.rff.org/publications/explainers/us-electricity-markets-101/
“Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs)” by U.S. Energy Information Administration (EIA): https://www.eia.gov/todayinenergy/detail.php?id=46516
This article is a part of the class
“751447 SEM IN CUR ECON PROB”
supervised by
Asst. Prof. Napon Hongsakulvasu
Faculty of Economics,
Chiang Mai University
This article was written by LU LIU 631615511