As the West appears to move toward two separate day-ahead markets, data center developers like Google and clean energy companies are investing with the intent to mitigate seams and ensure operational consistency, panelists at an Advanced Energy United webinar said.

Representatives from Google, Leap Energy and Pattern Energy discussed the newly incorporated Regional Organization for Western Energy (ROWE) during a Feb. 3 webinar in conjunction with the release of a new AEU report on the advantages of a unified Western market.

ROWE is expected to assume governance over CAISO’s energy markets — the Western Energy Imbalance Market (WEIM) and soon-to-be-launched Extended Day-Ahead Market (EDAM). (See Pathways’ ROWE Incorporated in Delaware, Board Search Underway.)

The West-Wide Governance Pathways Initiative created ROWE as an independent organization to remove what some see as a barrier to wider participation in WEIM and EDAM by ensuring they are not governed predominantly by officials and stakeholders in California.

However, EDAM is not the only day-ahead market under development. Despite ROWE, a significant number of entities have opted to join SPP’s Markets+, which is scheduled to go live in 2027. (See BPA Outlines Next Steps in Markets+ Implementation.)

For Google, the split between EDAM and Markets+ could make moving clean energy “complicated and expensive,” according to Sydney Henry, the company’s data center strategic negotiator.

“This fragmentation will make specific clean firm projects financially unviable if we have to cross market borders to reach our key investments, in this case, likely our data center investments,” Henry said.

One issue is the market seams that will arise between EDAM and Markets+. The seams are created by different policies and separate dispatch between neighboring markets, which can result in additional costs for transferring energy across the boundary.

Google now looks at its data center investments in the context of how markets are likely to be structured and how to mitigate seams risk by, for example, ensuring that power purchase agreements are “in the same market or within the same structure as the data center,” she said.

“That’s always opportune, because then they’re operating under the same rules and the same constraints,” Henry said. “So, it’s both an opportunity and a bit of a risk mitigation effort as we continue to see how the different states land and the different utilities land within their preferences. But I think it would definitely be preferable, from our perspective, to have it as regionalized and stable as possible.”

Meanwhile, independent governance reduces seams costs and regulatory friction, which is important for large-scale energy investors like Google, Henry noted.

“We are investing in new markets,” she said. “This isn’t investments that we were maybe seeing five or 10 years ago in the couple million dollars. It’s now billions of dollars of investments.”

Resource Developer Challenges

Jack Wadleigh, senior regulatory and market affairs manager at clean energy developer Pattern Energy, likewise said the “multi-market landscape” introduces challenges for both existing projects and meeting contractual obligations.

Changes to Pattern’s settlement points within the markets for resources that are “pseudo-tied or dynamically scheduled” can significantly impact developers, Wadleigh said.

“And these issues are kind of ongoing, especially when we talk about things like congestion, revenues and whether you’re settling with the market operator or settling with the balancing area,” he said. “So, these are all kind of high-priority topics for Pattern as we’re thinking about the future state as we go into a world with multiple markets in the West.”

Instead of having a standardized approach, market fragmentation forces providers to adapt to the different markets’ bidding rules, timelines and performance metrics, according to Collin Smith, regulatory affairs manager at Leap Energy.

Smith sits on Pathways’ nominating committee as a representative of the distributed energy resources sector. (See Pathways to Engage Broad Set of Stakeholders to Select Independent RO Board.)

Leap’s operations are “largely limited to California because of the difficulty of integrating across multiple different types of participation in other states.”

“If you are creating multiple markets across the region, you’re just slowing down the ability for companies like Leap to be able to operate in those areas and make use of the different technologies that are already being adapted by customers across the West for their own purposes … losing the ability for those to be quickly integrated into the grid,” Smith said.