PacifiCorp, as well as the California Independent System Operator Corporation plan to work together in a way that will lead the and tired western part of the United States in a new energy sharing market direction. This is a very smooth the way for a reliable power delivery system by using more renewables.
PacifiCorp controls to balancing authorities that cover a total of six states in the western United States, and the ISO, known as the regional powerhouse, recently signed a Memorandum of Understanding (MOU) “to work toward creating an energy imbalance market by October 2014,” we learned according to MidAmerican Energy Holding Company Vice President Jonathan Weissgall.
PacifiCorp is actually a subsidiary of MidAmerican Energy. The company is dominant throughout the United States as far as their ownership and renewables, and MidAmerican is also a subsidiary of Berkshire Hathaway, owned by Warren Buffett.
The ISO in California operates the one and only advanced energy market in the region of the Western interconnect. Just like the majority of the Northeast, Canada and the Midwest, the ISOs real-time, IT optimized market can automatically balance electricity deviations throughout every 5 minutes, and it chooses the lowest-cost resource available.
The other 39 or so other electricity delivery systems throughout the West, which also includes PacifiCorp, managed the deviations with manual dispatches and another system of reserves.
This MOU points to a crucial shift by PacifiCorp toward the ISOs method, which could lead the way to a regional energy imbalance market, otherwise known as EIM. A PUCEIM, also known as a Public Utility Commission Energy Imbalance Market Group, which is composed of researchers from the National Renewable Energy Lab, the Western Governors Association, as well as other independent agencies throughout the nation, are working together to put together this type of a plan.
“This is good news for customers, renewables, integration of renewables, reliability and oversupply challenges,” said Weisgall.
For those people who don’t understand how renewables are fully integrated into California’s system argue that reliability is threatened because of the variability.
“If you have wider geographic areas sharing different plants, you can smooth some of that variability,” Amanda Ormond told GMT recently, as a representative of Interwest Energy Alliance Southwest. “An energy imbalance market allows dispatch of the lowest-cost resource to address energy imbalance when a load turns on unexpectedly.”
The many balancing areas in the West are not very flexible at this time, said Ormond, “because they have their own reserves to call on for imbalance. They therefore keep large amounts of energy in reserve to meet potential contingencies. And the last generators you turn on are typically the most expensive.”
Without a solution for EIM, Ormonde tells us, the inefficiencies in the system will become more costly as the renewables increase in their variability. There is more flexibility with a EIM.
You will be able to accurately balance many resources across a modernized grid dispatching through interconnected systems and automated tools, we learned according to PacifiCorp. If you capture a wider portfolio of resources, an EIM basically ensures that electricity will show up when and where it is needed, and enhance the reliability while cutting costs.
Every new participant in the EIM will have their own start up cost related to the amount and size of their participation. It is estimated that PacifiCorp will pay around $2 million, we learned in their press release, although other existing ISO players are not going to have to pay anything. To use this EIM subsequently you will have to do so on a pay-as-you-go basis. PacifiCorp and the ISO to define additional benefits and costs.
The Western Interconnect EIM is going to have to be a voluntary market in order to preserve the current balancing authorities, stressed or month, “In an EIM, if I am a utility and I have a couple of generators that aren’t running, I could offer them to the system. When someone needs energy, they are going to ask for energy. I can either allow that to be scheduled or not.”
The American Public Power Association (APPA) voiced an objection, and they are a utility’s advocate that oppose the Western interconnect EIM, say that the absence of “critical details” in regards to market supervision and monitoring, governance, and the cost cause concerns that an EIM technically could “quickly evolve into a Regional Transmission Organization (RTO).”
In an effort to respond to this concern, Ormond clarified that it is a market in which you will balance energy, and it’s not an RTO. There are legal opinions which suggest that “an EIM can have a hard wall to prevent it leading to an RTO. It is a centralized unit for dispatch of balancing energy. It is not for capacity. If you offer a unit, it can be scheduled within the parameters you allow.”
Most importantly, Ormond repeated that it is voluntary. “If I want to go into this market, I can. But if I get into this market and find out it is not cost-effective for me, I can step back out.”
The American Public power Association believes that the operating costs and infrastructure “could, in some scenarios, outweigh the estimated benefits, with the net costs potentially reaching $1.25 billion in net present value terms over the first 10 years.”
Ormond said that the PUCEIM group has preliminary cost estimates from California’s ISO and the Southwest Power Pool which suggest that an estimated cost of $3.50 per megawatt hour. But there is further analysis and other market design studies underway to improve these benefits.
“We’ll be working in the coming weeks with the CAISO to finalize the terms of a more specific agreement,” said Weisgall. “We also continue to support ongoing regional discussions that will eventually lead to much broader, region wide coordination, and we’re hopeful this initial step will help facilitate these broader efforts.”