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Regional Energy Integration Captures National Attention as California Quietly Leads the Way
Calls for a North American supergrid enjoyed a brief plug during the final presidential debate when Hillary Clinton, clarifying a past statement publicized by WikiLeaks, stated: “[W]e trade more energy with our neighbors than we trade with the rest of the world combined. And I do want us to have an electric grid, an energy system, that crosses borders. I think that would be a great benefit to us.”
As Clinton suggested, establishing a regional supergrid could generate numerous benefits, including improved operational efficiency, reduced costs, and the ability to harness renewable power on a bulk scale, thereby accelerating the decarbonization of the electric power system. Yet, as discussed in a recent Guidehouse Insights report, many barriers to supergrid development remain, and a truly integrated hemispheric electricity market seems a distant dream. Even so, progress toward increasing integration within the United States and across North America is proceeding incrementally. California, consistently at the vanguard of energy innovation, offers an example.
California Market Expands, Eyes Mexico
California’s Energy Imbalance Market (EIM) began operating in fall of 2014, when the California Independent System Operator (CAISO) linked up with Oregon-based PacifiCorp to form a wholesale power market. Managed by CAISO, the EIM pools resources across participants’ territories, automatically balancing real-time electricity supply and demand and enabling utilities to access renewable energy generated across a wider geography. NV Energy of Las Vegas joined the EIM in December 2015, and both Arizona Public Service and Puget Sound Energy of Washington joined in October of this year. To date, the EIM has saved over $114 million and avoided over 140,000 metric tons of CO2 emissions.
With a 2-year track record of savings, the EIM is set to expand further. Portland General Electric and Idaho Power are both slated to join within the next 18 months, and the Sacramento Municipal Utility District (SMUD) announced its intent to join in late October. SMUD would be the first municipal utility to join and would likely be followed by several others.
With integration among Western utilities growing, CAISO is now pursuing expansion south of the border, recently announcing plans to explore extending the EIM to Mexican grid operator El Centro Nacional de Control de Energia (CENACE). CENACE’s Baja California Norte Grid already has two connections to the California grid, and its participation in the EIM is expected to enhance the overall economic and environmental benefits of the market while opening additional renewable generation to Mexico, which is targeting 35% of its electricity from renewables by 2024.
Full Integration a Long Way Off
Despite steady growth, the EIM represents only limited energy market integration. The EIM’s authority is restricted to balancing real-time supply and demand among participants and dispatching least-cost resources to meet load requirements every 5 minutes. CAISO is also pursuing a full-service day-ahead regional energy market that would require deeper market integration and, in theory, lead to more comprehensive benefits. The regional energy market would take the form of an expanded CAISO and would be designed to enable more efficient integration of renewable resources, improve regional transmission planning, and optimize use of all available generation and transmission capacity in the day-ahead market, further reducing consumer costs.
Under state legislation, CAISO is required to complete studies on the environmental and economic benefits of a regional energy market and to submit a proposal for CAISO expansion before the end of 2017. Final study results were released in July, but the proposal was delayed to allow more time to address concerns, including the risk that integrating with coal-heavy PacifiCorp could hurt California’s clean energy agenda. The proposal is now expected to reach the state legislature in January.
With potential EIM expansion into Mexico and a broader regional energy market plan in the works, California has cemented its role as a major driver of increasing energy market integration in the West. Yet the incremental nature and uncertain pace of integration suggest that the hemispheric electricity system Hillary Clinton alluded to is still a long way off.