Taming the Wild West: CAISO begins study of a full regional electricity market
The grid operator will seek to understand how a regional system will affect the state’s transition to 50% renewables by 2030
lifornia’s electric system operator is studying the possibility of turning the entire West into a single electricity market.
It’s the beginning of a process that could eventually turn as many as 38 individual balancing authority areas (BAAs) into a market richer in resources than the Midcontinent Independent System Operator (MISO) or the PJM Interconnection. But first, crucial questions need to be answered about who will pay, who will benefit, and what kinds of energy the system will carry.
“A regional grid can access the untapped flexibility and diversity of resources throughout the West,” said Keith Casey, vice president of the California Independent System Operator (CAISO). “But we will do our due diligence to understand the full implications to the overall economy and the environment so we can make an informed decision.”
California’s landmark Senate Bill 350 (SB 350) ordered the study to determine whether a regional market is the surest path to achieving the state’s 50% renewables by 2030 mandate.
CAISO has assembled a reputable set of consultants and academics to assess the potential of a regional market. The Brattle Group will lead and coordinate. Energy+Environmental Economics (E3) will assess resources. University of California economists will assess costs and benefits. Aspen Environmental will study environmental impacts.
Preliminary results and a timeline were presented to California stakeholders February 8. Results of the study must be delivered to the governor by December 2017, but the study is on track to be ready for official review by mid-June, according to Casey.
Origins of the Western market idea
The concept of regional markets emerged in the mid-to-late 1990s when, led by the Clinton Federal Energy Regulatory Commission, power pools like PJM and ISO-New England were formalized, Casey said.
A national discussion about organized markets’ efficiencies followed. At that time, Western BAAs were not eager to give up their independence, he recalled. California’s 1999 to 2000 energy crisis disinclined them further.
But as California’s grid operator rebuilt from the energy crisis “ground zero” to a workable system, interest in a regional market renewed, Casey said. “The tipping point was the operational challenge of integrating renewables.”
The West’s BAAs see variability increasing on their systems, he said. “They are beginning to understand the region’s resource and demand diversity can make dispatch more flexible and efficient.”
Interest accelerated with the emergence of the CAISO’s Energy Imbalance Market (EIM) in 2014 when Warren Buffett’s six state Pacificorp utilities joined with California.
The EIM uses the ISO’s state-of-the-art market software system to allow transfers in five minute and fifteen minute increments of lower cost supply from one BAA to meet demand in another.
CAISO numbers reported in August 2015’s Benefits for Participating in EIM showed benefits of $10.18 million for Q2 2015 and total gross benefits for the eight months of the EIM’s operation of $21.41 million.
Those findings provide confidence that benefits predicted when NV Energy, another Buffett-owned utility, joins the EIM this fall can be realized. They also boost expectations that returns will be yet higher when Arizona Public Service and Puget Sound Energy join the market later this year.
“Those benefits are the tip of the iceberg of what a regional energy market can offer,” Casey said. “Only so much is possible in real time. Coordinating and optimizing dispatch in the day ahead time frame adds an order of magnitude more flexibility in the use of generating units and access to transmission.”
The promise of a full Western market
A Western region energy market would use the same CAISO technology to “coordinate electricity systems across the West” and “take full advantage of the region’s renewable resources,” according to the CAISO’s summary of benefits. It would also create “disincentives to send coal-generated energy to California.”
A regional market will allow system operators to do more advanced planning and give them increased situational awareness that will lead to lower cost power purchasing, it adds.