ISOs/RTOs and Potential Implications for the Future of Energy

January 30, 2025
The landscape of energy generation, transmission, distribution and consumption is undergoing a significant transformation, catalyzed by the emergence of new, and evolution of existing, Independent System Operators (ISOs) and Regional Transmission Operators (RTOs). Ulteig’s Studies team brings a myriad of experience working with ISOs and RTOs. Specifically, in processes such as transmission planning, completing interconnect studies and all the work related to getting projects into the interconnection queues. These entities are pivotal in the current and future state of electricity markets in the United States, and they wield substantial influence over the integration of renewable energy, the stability of the power grid and the economics of electricity.
Understanding ISOs/RTOs and the Key Role They Play
ISOs/RTOs operate regional markets and manage the transmission grid across the service territories of incumbent transmission owners. This establishes these regional entities as the foundation of the security, reliability and efficiency of the nation’s electric supply system.
ISOs/RTOs enable regional planning and cooperation among a diverse group of stakeholders, including utilities, generators, regulators and consumers. Historically, ISOs/RTOs were solely responsible for the interconnection and operation of large-scale and typically fossil resources on the bulk electric system. However, this responsibility has shifted to accommodating a diverse generation fleet of large and distributed generators as well as retail participants in load response programs. The Federal Energy Regulatory Commission (FERC) has championed ISOs/RTOs since the 1990s, promoting competition and innovation in the electricity sector. As the nation’s energy landscape continues to evolve, more states are signing on to participate in these regional entities.
The Momentum for New ISOs/RTOs in the West and Southeast
Despite the absence of a federal mandate for ISOs/RTOs, about two-thirds of the U.S. electricity demand is covered by these entities. However, regions like the West and Southeast have traditionally operated without regional coordinators, relying instead on utility ownership of generation resources, utility planning, operation of the transmission system and bilateral contracts for additional supply where needed. The tides are changing, driven by several factors:
- Increased penetration of intermittent resources, requiring more cross-state coordination of supply for reliability and resiliency.
- The need for more interregional transmission to deliver power from a more diverse and dispersed generation fleet, especially for regions experiencing rapid load growth.
- The push for market transparency and the opportunity for increased competition in the development of new supply.
- Policy pressures, such as those from the Clean Power Plan and the Regional Greenhouse Gas Initiative, aimed at reducing emissions.
- The recognized benefits of regional cooperation in improving reliability, reducing consumer costs and managing environmental pressures.
Challenges and Opportunities Ahead
The creation of ISOs/RTOs in the West and Southeast has been a long process with plenty of political, economic and operational challenges along the way. The diversity of the regions, stakeholder skepticism, regulatory hurdles and the unpredictability of technological advancements have made it difficult to create processes, governance structures, cost allocation and recovery mechanisms that make all parties happy. However, as existing ISOs/RTOs continue to make progress on new market structures, states and grid operators continue to embrace the aforementioned benefits and look to join these regional entities.
These challenges are counterbalanced by significant opportunities:
- The development of a broader market can boost the sector’s efficiency and competitiveness.
- Economies of scale could lead to reduced operational costs and a more coordinated approach to grid maintenance and investment.
- New ISOs/RTOs can be hotbeds for innovation, propelling the adoption of cutting-edge technologies and power engineering services.
- Integrating new types of generation while meeting the rapidly growing demand for electricity is perhaps the most compelling opportunity, as it supports economic growth while maintaining the security afforded by a reliable electric grid.
Shore Up Grid Resilience with Ulteig
Progress continues to be made on the modernization and potential expansion of ISOs/RTOs, with the potential to profoundly reshape the energy sector. These entities could herald a new era of energy efficiency and reliability. As additional regional entities begin to take more formal shape, they could become influential forces in steering the national energy agenda toward a more resilient and eco-friendly future.
Ulteig supports key projects across the Power and Renewables Lifeline Sectors through comprehensive engineering, consulting and project management services.
Contact Ulteig today to learn how we can support your ISO/RTO or grid infrastructure project.
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