California Grid Operator Aims for 2024 Regional Day-Ahead Market
The California-led real-time Energy Imbalance Market has delivered significant savings to Western power providers, but other regions’ market ambitions are threatening the plan to expand it to a day-head market in three years.
The Northwest Power Pool is developing a capacity sharing program, and the Southwest Power Pool is developing a day-ahead market. In addition, a new Xcel Energy-led Western Markets Exploratory Group, which includes potential Extended Day-Ahead Market participants, is “exploring all options,” Xcel spokesperson Julie Borgen said.
In the California Independent System Operator’s new stakeholder process to put EDAM into operation in 2024, out-of-state EIM participants’ concerns about governance sharing will be “the first issue,” CAISO President and CEO Elliot Mainzer said at last week’s EDAM forum.
Western states’ challenges from rising penetrations of variable renewables and climate-driven extreme weather events “are better resolved collaboratively than by balkanization,” he added.
Recent governance reform that shares authority between the CAISO and EIM members helped initiate a timely relaunch of the COVID-delayed EDAM stakeholder process, many said. But other stakeholders have serious reservations because of concerns about CAISO’s willingness to similarly share control in a regional day-ahead market.
EIM governance reforms were a start, but EDAM will require significantly more, said Idaho Commissioner Kristine Raper. California must recognize and address states’ “different goals and legitimate interests.”
EDAM governance sharing is solvable, Southern California Edison President and CEO Kevin Payne told the forum. Doing it will be “a key test” for CAISO’s stakeholder process, but California “is ready to sit down with other states.”
Expanded Day-Ahead Market re-start
EDAM is the “right track” and questions of governance can be answered collaboratively, Pacific Power President and CEO Stefan Bird said. Pacific Gas & Electric Corp. CEO Patty Poppe agreed.
But the “real lift lays ahead,” cautioned President Doug Cannon of NV Energy, one of the Western Market Exploratory Group utilities looking for a market that provides participants a “voice in governance.”
The potential to resolve tough topics, however, was demonstrated in a forum presentation of design principles developed and agreed to by EDAM stakeholders, showing there is “more alignment than misalignment” between potential EDAM participants, CAISO SVP and COO Mark Rothleder said.
The principles were developed by investor-owned utilities in and outside California–Arizona Public Service, NV Energy, Idaho Power, PacifiCorp, SCE, PG&E, San Diego Gas and Electric–as well as public power agencies–Balancing Authority of Northern California, Salt River Project, and Seattle City Light.
Joining EDAM should be voluntary for power providers, but there should be “a minimum commitment period” and members’ entire load should be “optimized through EDAM,” the principles state.
The objective is to make each participant’s commitment to EDAM certain but give them an off-ramp if they choose to leave the market without compromising the reliability of other market participants, said representatives of BANC and PG&E.
EDAM dispatch should also maximize the West’s transmission capacity, but pre-existing contracts and tariff agreements should be protected, Idaho Power and SCE representatives insisted. Currently, one region’s curtailed renewables that could meet another’s needs may go unused because transmission capacity under bi-lateral contracts is not being used.
The EDAM resource sufficiency evaluation should optimize the region’s supply, especially during peak demand periods, PacifiCorp and SDG&E representatives said. But existing state resource adequacy and resource planning programs also must be respected.
Individual jurisdictions will still have primary responsibility for their own resource adequacy, but EDAM transfer commitments “must be firm” in order to give participants confidence in the market, Salt River Project and SCE forum presenters said.
Setting market prices
How to set market prices remains to be settled but will be key to market optimization, Seattle City Light and SDG&E forum speakers said. Price settlement certainty is the only way to have confidence in the benefit of the marketplace, but prices of resources may vary by region, location, and time. Thus, it could “be a big sticking point” or “derail the process,” they warned.
The Expanded Day-Ahead Market may not be Western states’ first choice. SPP’s Energy Imbalance Service (WEIS) is now competing with the CAISO-run EIM, and it is developing Markets+, which “would centralize day-ahead and real-time unit commitment and dispatch,” SPP, which serves 17 Midwest states from Montana to Texas, said. It “provides a voluntary, incremental opportunity” for utilities testing regional engagement.
SPP will also provide operations services for the Northwest Power Pool Western Resource Adequacy Program (WRAP), which would strengthen reliability for Northwest’s 20 power provider members. The Western Market Exploratory Group of utilities, which include WRAP and EDAM forum participants Arizona Public Service, Idaho Power, NV Energy, PacifiCorp, Salt River Project, and Seattle City Light, are assessing such services.
Forum participants’ reactions to the EDAM stakeholder process were mixed.
EDAM “is what is in reach,” said Commissioner Letha Tawney of the Oregon Public Utilities Commission.
But EDAM “can’t be the end goal” because the West needs a full-blown Regional Transmission organization, responded Northwest and Intermountain Power Producers Coalition Executive Director Spencer Gray. It will leave money “on the table every day in transmission and energy” because of lacking centralized transmission operations and planning, and fully optimized dispatch of the wholesale market, which the SPP and NWPP proposals are striving to create.
SPP has had serious conversations with regulators in the Western Interconnection about providing that market, and NWPP’s longstanding effort to support regional reliability is gaining attention, Idaho Commissioner Kristine Raper told Current. “Governance matters.”
California is gradually refining the EDAM governance framework and learning how to balance participants’ authority, Assemblyman Chris Holden said. To expand on the EIM success, “it is important to keep talking because that is how we get to the best structure for power-sharing.”
The EDAM stakeholder initiative will officially begin Nov. 12 with a foundational workshop. It will develop governance reform and policy design working groups that will report to the CAISO Board and EIM Governing Body in the fourth quarter of 2022.
Since 2014, the EIM has reaped $1.42 billion in cumulative benefits and will have secured 22 participants with 84% of the West’s electricity demand by 2023. Significantly more customer savings could be achieved by moving from the less than 10% of real-time power flows in the EIM to optimized dispatch across the West in an extended day ahead market.