Friday, October 20, 2017

CAISO Expansion in Question as EIM Grows

By Robert Mullin

CAISO rang in 2016 with a strong push to expand its operation into PacifiCorp’s sprawling six-state service territory, but the project hit a stumbling block by mid-year as skeptics called on the ISO to slow its regionalization effort.

A 2015 state law requires the grid operator and state energy agencies to explore ISO expansion to help California meet its 50% renewable energy mandate.

The ISO last year kicked off a set of initiatives considered to be “central” policy elements of expanding into a region with dozens of balancing areas subject to multiple state and municipal rules.

Those efforts — still ongoing — dealt with the complex and often contentious issues of allocating transmission costs, maintaining adequate regional resources and accounting for greenhouse gas emissions. (See CAISO Refines Cost Allocation Proposal for Expanded BA and CAISO Kicks Off Effort to Track GHGs Under Regionalization.)

But the most challenging initiative was the effort to develop governing principles that would assuage concerns about California dominating the policies and management of a Western RTO.

Particularly contentious is California’s requirement that the state’s utilities track carbon emissions from generation serving their loads in order to ensure compliance with emissions caps. CAISO’s provision of generation data is key to that effort, which means that every generator in an expanded ISO would be subject greenhouse gas reporting requirements in order to track deliveries to California — regardless of whether the unit is located in a coal-heavy state disinclined to impose such a requirement.

When industry participants across the West expressed concerns that an initial governance proposal threatened to compromise the energy policies of “non-California,” CAISO returned in July with a revised document that emphasized the preservation of state authority. (See Governance Plan Fails to Dispel Western RTO Concerns and Revised Western RTO Governance Plan Highlights State Authority.)

By late July, critics within California — fearing the loss of CAISO as an instrument of the state’s renewable and emissions goals — were calling for a slowdown in regionalization, saying that the ISO was moving too quickly to get a governance plan to the State Legislature before the end of its summer session. (See Governance Plan Critics Urge Slowdown of Western RTO Development.) Gov. Jerry Brown heeded their concerns, directing state agencies to take more time to develop a proposal. (See Governor Delays CAISO Regionalization Effort.)

While the ISO plans to submit a governance plan to lawmakers this winter, President-elect Donald Trump’s vow to cancel the Clean Power Plan is another roadblock for CAISO-led regionalization. Under the CPP, interior West states such as Utah and Wyoming would confront the requirement of sharply reducing carbon emissions from coal-fired generation, an objective made less costly by access to low- and zero-emission electricity made available through a regional market. With the Trump administration likely to pull the rug from under the CPP, coal-heavy interior West states contemplating an RTO will be less motivated to give ground to California’s environmental mandates in order to gain the emissions benefits of membership.

That, in turn, could prevent California legislators from signing off on a governance plan that risks the state’s ability to meet its goals.

“California will want to protect its environmental objectives,” retiring California Public Utilities Commissioner Mike Florio, a strong supporter of regionalization, told RTO Insider.

Ann Rendahl, commissioner with the Washington Utilities and Transportation Commission, said the success of regionalization will depend on how California’s lawmakers deal with the governance issue.

“It’s really in the hands of California,” Rendahl said.

EIM Accelerates Growth

The future looks brighter for the Energy Imbalance Market, the West’s only real-time energy market. Unlike in the ISO, members are not required to turn over control of their transmission and generator day-to-day participation is voluntary.

caiso eim seattle city light

The market last year extended its north-south reach with the integration of Arizona Public Service and Puget Sound Energy, expanding membership to four balancing authority areas, in addition to CAISO. The two utilities began transacting in the market in October after what officials called a largely uneventful implementation. (See Smooth EIM Transition for Arizona Public Service, Puget Sound Energy.)

“I’ve been through three sets of transitions, and I would say that each one is getting smoother,” Mark Rothleder, the ISO’s vice president of market quality and renewable integration, said during an Oct. 5 meeting of the EIM’s governing body.

Another transition is scheduled for October 2017 when Portland General Electric will join the market, the last fall entry before the ISO moves to a spring implementation schedule to avoid overlap with annual market software updates.

The benefits of NV Energy’s December 2015 integration into the EIM became evident in early 2016, after CAISO officials observed that the increased transfer capacity between the ISO and PacifiCorp East unified what had previously been a fractured market; California had found a real-time export market for its surplus solar and avoided curtailing a significant amount of renewable generation. (See CAISO EIM Boosts Market for Renewables in Q1.)

Last year also saw announcements from four utilities that said they intend to join the EIM.

In April, Idaho Power signed an implementation agreement that would make it the sixth BAA to join the market in spring 2018. Inclusion of the utility will bring an additional 4,800 miles of transmission into the market while improving trading access to an area of Wyoming that renewable developers — including EIM pioneer PacifiCorp — seek to tap for wind projects intended to serve the West Coast. (See Idaho Power Inks Agreement to Join EIM.)

Seattle City Light is slated to become the first publicly owned utility to join the EIM after signing an implementation agreement in December. (See Seattle City Light Signs EIM Membership Agreement.) City Light’s membership is contingent on satisfying the concerns of the Seattle City Council, which asked the company to flesh out the findings of an EIM benefits study showing the hydropower-rich utility could earn an additional $4 million to $23 million annually as an exporter of the flexible ramping capability needed to smooth out intermittent renewables. (See Council OKs Seattle City Light Bid to Explore Joining the EIM.)

The Sacramento Municipal Utility District said in October that it would begin negotiations to join the EIM, with some of the six other members of the Balancing Authority of Northern California — all publicly owned — to follow, depending on the outcome of cost-benefit assessments. (See Sacramento Utility to Join EIM; Other BANC Members May Follow.)

CAISO and El Centro Nacional de Control de Energía (CENACE), Mexico’s grid operator, announced an agreement in October to explore having the Baja California Norte region join the market as the first non-U.S. participant. (See Mexico’s Grid Operator to Explore Participation in the EIM.) While the region has no transmission connections with the rest of Mexico’s grid, it does boast 800 MW of transfer capacity with California through two 230-kV links at the Imperial Valley and Otay Mesa substations, and also offers promising potential for wind energy development.

2016 also saw the EIM begin to chart a course more independent of the ISO with the appointment of the market’s governing body and a clearer outline of governance. (See CAISO Board Appoints Western Energy Imbalance Market Governing Body.) At the body’s first meeting, Chairwoman Kristine Schmidt noted that a decade ago, nobody in the industry would have believed that the West would produce an organized real-time market.

“We’re now seeing a regional market take shape in the West,” Schmidt said.

In December, EIM and CAISO leaders approved a guidance document that provides solutions to the overlapping authority between the ISO’s Board of Governors and the EIM governing body resulting from the EIM’s delegation of a portion of its authority over Federal Power Act Section 205 filings to CAISO. (See EIM Leaders OK Governance ‘Guidance’ Proposal.)

The document outlines how ISO staff should interact with the EIM, providing a schedule for notifying the governing body about ISO initiatives and laying out the processes by which body members and EIM participants will provide feedback on proposed policy changes.

“I think this is an important step forward,” CAISO board member David Olsen said. “It really helps to clarify the scope of responsibility of the EIM board.”

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