Why the standard market design refuses to die.
Bruce W. Radford is editor-in-chief for Public Utilities Fortnightly.
Hold on to your hats. The vaunted and vilified “standard market design” (SMD), once thought dead and buried, has been resuscitated, with all attendant chaos and rhetoric, but this time in the guise of a new proposal that debuted in early August under the code name “open dispatch.”
This new construct, as remarkable in its way as Einstein’s theory of indeterminate space and time, declares that electric transmission, long seen as one of a triumvirate of unique and essential utility industry sectors (along with generation and distribution), is little more than a mirage.
Rather, it is the sequencing and dispatching of generating units, accomplished in real time along principles of marginal cost, and with full respect for the physics and security constraints of the grid, that constitutes the real “service”—the single substantive activity and one that warrants full federal regulation. In this view, the three true industry sectors are: (1) generation; (2) dispatch; and (3) “load assets” (or distribution). Transmission, along with his sidekick “open access,” becomes odd man out—not so much a function as a playing field, in which transactions take place.