CAISO/PacifiCorp Turn the Dial Up to 11
We’ve been reporting on the efforts of the California Independent System Operator (CAISO) to launch its Energy Imbalance Market (EIM) for some time now. We like the EIM because it allows new levels of electricity exchange, which improves efficiencies and lowers costs for our increasingly renewably-powered grid. The regional electricity market, which has been up and running for around six months, currently covers most of California and areas within PacifiCorp’s six-state footprint in the west. By the fall of this year, NV Energy will join, followed by Puget Sound Energy and very likely Arizona Public Service in 2016.
But CAISO and PacifiCorp significantly upped the ante recently with the announcement that they are studying the feasibility of PacifiCorp becoming a full participating member of CAISO. This is a huge potential game-changer for the west, and particularly for renewable energy. To fully appreciate the implications, we first need to explain the difference between participating in the EIM and becoming a full member of CAISO.
The EIM is one of many services offered by the CAISO. It handles short-term (5-minute) balancing of electric supply and demand, which accounts for a relatively small, but exceedingly important amount of energy exchange necessary for keeping the electric grid operating. The EIM can help support integration of variable wind and solar energy by matching supply with demand across a wide geography as weather conditions change. As currently designed, the EIM is a voluntary market, meaning participants can choose when or whether to participate. They can also quit the market entirely without penalty – which is one of the main attractions for risk-averse, on-the-fence utilities that want to dip their toes into a regional market.
If PacifiCorp joins CAISO as a full participating member, it’s a whole new ballgame. In addition to the EIM, they would now be committed to making all of their energy available for scheduling by the CAISO in the day-ahead energy market.That’s 24/7 energy from all resources PacifiCorp has at its disposal and not just short-term energy used to balance the grid. This would make significantly more resources available to both the CAISO and PacifiCorp, resulting in more efficient use of transmission and generation resources, lower costs for consumers and greater reliability.
But the really good news is that it will allow more efficient exchanges of renewable energy in the six states where they operate, potentially lowering greenhouse gas emissions across a broad area. So instead of PacifiCorp dispatching coal or gas to meet their midday energy needs, they could import excess solar from California. And instead of curtailing excess wind in its service area, PacifiCorp could send it to California. This would help California meet it’s proposed 50% renewable target without affecting reliability, and it would help PacifiCorp meet the greenhouse gas reduction targets proposed by the EPA’s Clean Power Plan.
There are many details to work out, including governance, what rate would have to be paid for the Transmission Access Charge, whether additional transmission would be necessary to take full advantage of the deal, and how to deal with PacifiCorp’s coal fleet (which by California law would not be allowed to supply loads in the Golden State). The deal would also need to be approved by Public Utilities Commissions in six states, as well as the Federal Energy Regulatory Commission (FERC). But CAISO and PacifiCorp are already dealing with similar issues as the EIM expands and both parties seem anxious to get a deal done soon. A study will be completed by this summer, and if all goes well, the two could begin coordinated operations in 2017.
Call us optimists, but we believe this is just the tip of the iceberg. We’re already seeing more utilities interested in joining the CAISO EIM or create their own form of real-time balancing and reserve sharing arrangements. Given the significant advantages and cost savings, we believe more dominos will begin falling along the way to more regional coordination.
Lower costs, higher reliability, and cleaner energy – that’s a combination that’s hard to beat!
Note that CAISO offers a number of additional services, including ancillary services (regulation up/down and spinning/non-spinning reserves), residual unit commitment, congestion revenue rights, convergence bidding – all of which are too complex to get into here, but in which PacifiCorp would also participate.