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September 30, 2014

California’s subhourly wholesale electricity market opens to systems outside its footprint

map of CAISO footprint and PacifiCorp and NV Energy electric service territories, as explained in the article text

On October 1, the grid operator for most of California will begin simulating the balancing of subhourly electricity supply and demand for PacifiCorp's electric service areas in the western United States through an energy imbalance market (EIM). After a month of simulation, financially binding operations will begin on November 1. By adding its generation resources to the resource pool of the California Independent System Operator (CAISO) to meet subhourly electricity imbalances, PacifiCorp anticipates enhanced reliability and cost savings, particularly in the face of higher levels of renewable energy generation in the West.

This marks the first time that CAISO will dispatch electricity (see box) for regions lying outside of its footprint. Currently, 38 electricity balancing authorities balance electricity supply and demand in their portions of the western North American grid and coordinate their operations with neighboring balancing authorities. Energy transfers between balancing authorities (i.e., interchange) are primarily done hourly, although earlier this year CAISO switched from hourly to 15-minute interchange scheduling.

U.S. electricity balancing authorities in the Western Electricity Coordinating Council electric reliability region, as explained in the article text
Source: North American Electric Reliability Corporation
Note: Click to enlarge. CISO = California Independent System Operator, PACE = PacifiCorp East, PACW = PacifiCorp West, NEVP = Nevada Power Company (NV Energy). See full list of balancing authority names here.

CAISO's energy imbalance market is used to procure electricity to cover unscheduled real-time mismatches between supply and demand. Because electricity demand is the aggregated demand of all electricity users on the system, there will naturally be fluctuations in electricity demand at any given time. Supply can fluctuate because of unplanned generator and transmission line outages and variability in renewable energy generation. Fluctuations in renewable energy generation, which can occur suddenly and frequently within an hour, are difficult for western grid operators to manage because of the limited pool of generation resources under their control and the relatively infrequent dispatch of generators on an hourly basis. These fluctuations require western grid operators to maintain higher levels of extra power reserves to cover unexpected changes in supply and demand and ultimately lead to higher power prices.

While resources in the West will automatically respond to electricity imbalances in real-time, there is no commercial structure, such as a market, in most parts of the region that compensates for and optimizes this supply response. The California ISO imbalance market, which includes 15-minute generation scheduling and 5-minute dispatch, provides PacifiCorp with optimized and controlled subhourly balancing and a way for supply resources to be compensated for their adjustments.

PacifiCorp hopes to see cost savings from the market's usage of lowest-cost generators dispatched more frequently and the market's ability to draw from the much larger pool of generation resources available across the CAISO footprint.

Real-time generator dispatch

Regional grid operators in the United States balance real-time electricity supply and demand by dispatching generation resources at frequent intervals; that is, they instruct generators to run at specific levels of output given the current system's needs.

In all of the regional transmission organization (RTO) areas, generators are dispatched every five minutes.

In non-RTO areas, including all of the western United States apart from California, generators are typically dispatched every hour.

More-frequent dispatch intervals give grid operators more flexibility in adjusting generation to match sudden fluctuations in electricity supply and demand.

Further cost savings may be achieved from the ability to absorb the output of renewable resources over a wider geographic area. For example, excess renewable generation in California can be used to meet demand in PacifiCorp's territories and vice versa. And as more renewable energy resources come online in the future, the pooling of geographically diverse renewable resources should help smooth out the variability in overall renewable generation.

PacifiCorp will retain all of its normal grid reliability and transmission service responsibilities after joining the imbalance market. CAISO will not assume any grid operator duties for PacifiCorp's service areas apart from the subhourly scheduling and dispatch of PacifiCorp's EIM-participating generators.

EIM-related power transfers between CAISO and the PacifiCorp territories will initially use transmission capacity made available to the EIM by PacifiCorp and capacity currently under CAISO's operational control. For EIM-related power transfers between their footprints, CAISO and PacifiCorp plan to mutually waive normal transmission import/export fees.

NV Energy is slated to join the EIM in October 2015. PacifiCorp and NV Energy are both subsidiaries of Berkshire Hathaway Energy (previously MidAmerican Energy Holdings). Other western balancing authorities are considering joining the EIM but are waiting to review PacifiCorp's experience.

Principal contributors: April Lee, Bill Booth