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California Independent System Operator - Part 6 – Expansion

John Benson's picture
Senior Consultant Microgrid Labs

PROFESSIONAL EXPERIENCE:Microgrid Labs, Inc.Senior Consultant: 2014 to PresentDeveloped product plans, conceptual and preliminary designs for projects, performed industry surveys and developed...

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1.Introduction

In part 1 of this series (linked below) we started exploring the California Independent System Operator (CAISO). We examined CAISO's self-description, terminology, information sources and some of the CAISO entities.

https://www.energycentral.com/c/pip/california-independent-system-operator-part-1-introduction-information-and

At the same time as Part 1 we also posted an abbreviated CAISO Glossary (with links to the full Glossary in Part 1). The link to the abbreviated glossary is below.

https://www.energycentral.com/c/pip/california-independent-system-operator-simplified-glossary

In Part 2 we completed the entities and started the examination of CAISO processes. A link to Part 2 is below.

https://www.energycentral.com/c/pip/california-independent-system-operator-part-2-%E2%80%93-entities-and-processes

In Part 3 we continued to focus on CAISO Processes. A link to Part 3 is below.

https://www.energycentral.com/c/pip/california-independent-system-operator-part-3-processes

In Part 4 of this series we continued to focus on processes with our review of the CAISO Day-Ahead, and Real-Time Market Processes. A link to Part 4 is below.

https://www.energycentral.com/c/pip/california-independent-system-operator-part-4-processes

Part 5 was the final post on processes and the California operations of CAISO. It covered E-Tagging, Post-Market Validation, Price Corrections and Settlements. The link below is to this paper.

https://www.energycentral.com/c/pip/california-independent-system-operator-part-5-%E2%80%93processes

In this post we explore the CAISO as it expands beyond California. The CAISO is following several paths that may lead it to evolve into a Western Regional Transmission Organization (RTO). One of these paths is the Western Energy Imbalance Market, and the other is an in-progress initiative to become its own Reliability Coordinator, and to offer this service to other WECC utilities outside of California. There is also a legislative initiative to endorse the path to become a Western RTO.

We will cover all of the above in this post, but first, in the next section, the answer to a big question.

2.Why California?

The following table lists the states and provinces in the Western Electricity Coordinating Council (WECC) along with the gross domestic product (GDP)[1][2] and the population[3][4] of each.

State/Province

GDP ($US Billions)

Population (Thousands)

Alberta

241

4,067

Arizona

306

7,016

British Columbia

202

4,648

California

2,623

39,537

Colorado

323

5,607

Idaho

68

1,717

Montana

46

1,050

Nevada

158

2,998

New Mexico

94

2,088

Oregon

229

4,143

Utah

158

3,102

Washington

477

7,406

Wyoming

38

579

TOTALS

4,963

83,958

 

From the standpoint of bulk transmission grid size, the CAISO control area has approximately 4,000 buses and 6,000 lines. The WECC model (as used by CAISO) has approximately 14,000 buses and 18,000 lines.

California provides about half of the GDP, and contains about half of the population totals in the WECC area, and about a third of the grid buses and lines.

Furthermore there have been several attempts outside of California to form regional organizations in the WECC area, but none of these have succeeded. The CAISO was founded 20 years ago, and after a bumpy start, has become a very successful and efficient organization.

So one answer is, CAISO appears to be the only viable option for a widespread Western RTO.

But another answer is perhaps more important in the long-term, to provide a major increase in the "law of large numbers" mitigation to wind and solar power variability. Even though California already has a large percentage of the renewables in the west, they do not have a large (enough) area, and it is the wrong shape. Weather patterns mostly move from the west to the east, and since California is a "north and south" state, these pass through the state very quickly, with the California renewables seeing similar solar and wind resources at about the same time. By greatly expanding this area, there is a high probability that, when California has low wind speeds, some other western area will be windy. Although low-solar is less common (and mainly in the off-peak late fall through early spring time), there will still be some mitigation.

Renewables offered into the day-ahead market will also have a greater chance of finding a buyer through the Energy Imbalance Market described in the first section below.

3.CAISO Western Energy Imbalance Market

If you read part 4 of this series, you will remember that the CAISO has two markets: The Day-Ahead Market, and the Real-Time Market. At the beginning of section 2.2 (Real-Time Market), we defined Imbalance Energy as the "… difference between supply and demand in the Real-Time verses the Energy and Demand scheduled in the Day–Ahead Market." Also one of the main functions of the Real-Time Market was to minimize Imbalance Energy by using existing bids, and accepting new bids for the Real-Time. The CAISO Western Energy Imbalance Market is an extension of the CAISO Real-Time Market, and supports imports and exports from/to other Balancing Authority Areas.

The California ISO’s western Energy Imbalance Market (EIM) is a real-time bulk power trading market, the first of its kind in the western United States. EIM’s advanced market systems automatically find the lowest-cost energy to serve real-time customer demand across a wide geographic area. Utilities will maintain control over their assets and remain responsible for balancing requirements while sharing in the cost benefits the market produces for participants. The map below shows current EIM participants, and those utilities that plan to join in the next few years.[5]

Since launching in 2014, the western EIM has enhanced grid reliability and generated cost savings in the $millions for its participants. Besides its economic advantages, the EIM improves the integration of renewable energy, which leads to a cleaner, greener grid.

3.1.Governance

EIM is governed by a five member body with delegated authority over rules specific to the western EIM.

To create a governance structure for EIM, a transitional committee was formed, inclusive of stakeholders throughout the west. These stakeholders came together to design a governance framework formalized in a charter. The charter establishes the EIM Governing Body, which has been delegated levels of authority from the ISO Board of Governors on rules specific to participation in the EIM. In addition, the charter establishes two other components of the overall governance structure for the EIM: a Body of Regulators and a Regional Issues Forum.

3.2.Operations

The EIM allows participants to buy and sell power close to the time electricity is consumed, and gives system operators real-time visibility across neighboring grids. The result improves balancing supply and demand at a lower cost. The EIM platform balances fluctuations in supply and demand by automatically finding lower-cost resources from across a larger region to meet real-time power needs. EIM also manages congestion on transmission lines to maintain grid reliability and supports integrating renewable resources. In addition, the market makes excess renewable energy available to participating utilities at low cost rather than turning the generating units off.[6]

3.3.Benefits

Increased regional coordination in generating and delivering energy produces significant benefits in several areas:

  • Reduced costs for market participants by reducing the amount of costly reserves utilities need to carry, and more efficient use of the regional transmission system.
  • Reduced carbon emissions and more efficient use and integration of renewable energy. For instance, when one utility area has excess hydroelectric, solar, or wind power, the ISO can deliver it to customers in California or in one of the other seven western states served by EIM. Likewise, when the ISO has excess solar energy, it can help meet demand outside of California that otherwise would be met by more expensive — and less clean — coal or gas generation.
  • Enhanced reliability by increasing operational visibility across electricity grids, and increasing the ability to manage transmission line congestion across the region’s high-voltage transmission system.
  • Easy and economical entry and exit: Studies indicate that the benefits to all customers in the eight-state EIM footprint outweigh the costs of participating in the EIM. In addition, an EIM participant can choose to leave the market at any time with no exit fees.
  • Preserving autonomy: EIM participants maintain operational control over their generating resources, retain all their obligations as a balancing area, and must still comply with all regional and national reliability standards. For example, obligations to comply with standards, procuring ancillary services, physical scheduling rights and bilateral trades do not change with EIM.

4.Reliability Coordinators (RC)

The North American Electric Reliability Corporation (NERC) defines a Reliability Coordinator as: The entity that is the highest level of authority who is responsible for the Reliable Operation of the Bulk Electric System, has the Wide Area view of the Bulk Electric System, and has the operating tools, processes and procedures, including the authority to prevent or mitigate emergency operating situations in both next-day analysis and real-time operations. The Reliability Coordinator has the purview that is broad enough to enable the calculation of Interconnection Reliability Operating Limits, which may be based on the operating parameters of transmission systems beyond any Transmission Operator’s vision.

Reliability coordinators have been assigned for each area in the North American Grids as defined by the figure below:[7]

Note the following:

  • In many areas the Balancing Authority is also the Security Coordinator (PJM, NYISO, MISO and ISO-NE for instance).
  • The current reliability coordinator for California and most of the rest of WECC is Peak Reliability (link below).

https://www.peakrc.com/aboutus/Pages/default.aspx

On Jan. 2, 2018, the California ISO announced it would become its own Reliability Coordinator (RC) in September 2019 and offer these services to other electricity balancing authorities in the western United States, Canada, and Mexico. CAISO notified Peak Reliability and its members per the above announcement. CAISO has also had discussions with other Peak Reliability members about the above intent. [8]

The ISO is now moving forward on two tracks to become a Reliability Coordinator (RC): obtaining certification from the North American Electric Reliability Corp. (NERC); and conducting a public stakeholder initiative process to set rates, terms, and conditions of the RC services.

The CAISO is also currently initiating a third track to implement software development and customer on-boarding.

The CAISO is working with Peak Reliability on the transition and is in continuing discussions with NERC, the Federal Energy Regulatory Commission (FERC), and the Western Electricity Coordination Council (WECC) regarding the new RC function. A public process was executed, with informational calls and three regional meetings in California, Arizona and Oregon which took place in January 2018. These discussions were used to draft a straw proposal for the rate design of the CAISO RC function, which opened the formal CAISO stakeholder initiative process. Meanwhile, the CAISO established an oversight committee and working groups with interested parties to discuss the transition and implementation of RC services.

A straw proposal was released on April 5, followed by a meeting with stake-holders in May. A draft final proposal for Reliability Coordinator Rate Design, Terms and Conditions was released on June 20. Comments were received on this document from the following participants:

  • Arizona Public Service Company
  • Avangrid Renewables, LLC (Iberdrola Group wind & solar project developer)
  • Balancing Authority of Northern California
  • Black Hills Energy
  • Bonneville Power Administration
  • Idaho Power Company
  • Modesto Irrigation District
  • NaturEner USA, LLC (wind-only Balancing Authorities, NaturEner Power Watch, LLC and NaturEner WindWatch, LLC)
  • Natural Resources Defense Council (nonprofit organization of scientists, lawyers, and environmental specialists dedicated to protecting public health and the environment
  • PacifiCorp
  • Portland General Electric
  • Southern California Edison
  • The Cities of Anaheim, Azusa, Banning, Colton, Pasadena, And Riverside, California (a.k.a., Six Cities)
  • Salt River Project
  • Western Interconnection Regional Advisory Body (WIRAB’s membership is comprised of states and provinces with territory in the Western Interconnection and represented primarily by Public Utility Commissioners and State Energy Office Directors who understand the importance of bulk power system reliability, efficient and cost-effective RC services, and robust stakeholder engagement)

The author skimmed through the comments and thought they were generally positive, and most had to do with ways to reduce the Tariff costs.[9]

After the above meetings CAISO made several amendments to the Tariff, etc. and held additional meetings with the stake-holders.

On July 26, the CAISO Board of Governors approved the proposed rates, terms and conditions for the CAISO to provide RC services.

On July 30, Balancing Authority of Northern California (BANC) became the first entity to publicly commit to taking RC services from ISO. BANC is a Joint Powers Authority of Sacramento Municipal Utility District (SMUD), Modesto Irrigation District (MID), Roseville Electric, Redding Electric Utility (REU), Trinity Public Utility District, and the City of Shasta Lake.

On August 23, Idaho Power and PacifiCorp announced a commitment to receive RC services from the CAISO.

I have seen indications that most other Balancing Authorities in WECC will choose to use the CAISO BA services. The reliability coordinator services rate design, terms and conditions were filed with the Federal Energy Regulatory Commission on August 31. A FERC decision is expected in November, and the CAISO plans to launch its new services by July 2019.

5.Political Dances

Assembly Bill 813 (AB-813), Multistate regional transmission system organization: membership didn't have the votes to pass this year. Ditto last year.[10]

The main question here is whether there will be an accelerated movement of CAISO to evolve into a Western RTO, or a slow evolution to take over various RTO functions. This has become a really strange political argument. For instance, some environmental groups support the fast-track, and others oppose it. The latter seem to be driven by the concern that CAISO will be "forced" to support positions that are contrary to California's leadership role in climate change mitigation.

A well-balanced report by Next10 reviews the main arguments for and against the above fast-track.[11] Although this report comes down on the "for" side of this argument, I personally believe a slower approach might be more effective. There are other WECC states that are as uncomfortable in bed with California as we are with them.

 

[1] Wikipedia, List of U.S. states and territories by GDP, this uses U.S. Department of Commerce data that was retrieved in June 2017, https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_GDP

[2] Wikipedia, List of Canadian provinces and territories by gross domestic product, This was in 2016 Canadian Dollars which were converted to U.S. Dollars at today's exchange rate of US$ 0.77 = Can$ 1.00, https://en.wikipedia.org/wiki/List_of_Canadian_provinces_and_territories_by_gross_domestic_product

[3] Wikipedia, List of U.S. states and territories by population, 2017 estimates were used, and this was based on an United States Census Bureau estimate. https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_population

[4] Winkipedia, List of Canadian provinces and territories by population, 2016 Census was used, https://en.wikipedia.org/wiki/List_of_Canadian_provinces_and_territories_by_population

[5] Western Energy Imbalance Market (EIM), About, https://www.westerneim.com/Pages/About/default.aspx

[7] NERC, Transmission Loading Relief Procedure, Security Coordinators, https://www.nerc.com/pa/rrm/TLR/Pages/Reliability-Coordinators.aspx

[8] California ISO, Reliability Coordinator FAQ, http://www.caiso.com/Documents/ReliabilityCoordinatorFAQ.pdf

[9] CAISO, Response to Stakeholder Comments on Draft Reliability Coordinator Services Agreement (RCSA), Reliability Coordinator Services Rate Design, Terms, and Conditions, http://www.caiso.com/Documents/StakeholderCommentMatrix-ServiceAgreement-ReliabilityCoordinatorRateDesign_Terms_Conditions.pdf

[10] California Legislative Information, AB-813 Multistate regional transmission system organization: membership.(2017-2018) https://leginfo.legislature.ca.gov/faces/billCompareClient.xhtml?bill_id=201720180AB813

[11] Bentham Paulos, Principal, Paulos Analysis, Next10, "A Regional Power Market for the West, Risks and Benefits" July, 2018, http://www.next10.org/sites/default/files/regional-power-market-west.pdf

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Wayne Lusvardi's picture
Wayne Lusvardi on Oct 1, 2018

Re: "Reduced costs for market participants by reducing the amount of costly reserves utilities need to carry, and more efficient use of the regional transmission system".

Reduced costs is not really so, right? Doesn't RE have a monopoly price when the sun is shining and the wind is blowing in California?  There is no competition with Nat Gas or Nuclear power, right?  And does your assertion of reduced costs include all the cost shifting of RE onto conventional energy ratepayers? 

 

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