PacifiCorp and the California Independent System Operator Corp. (CAISO) have released a memorandum of understanding that commits the two largest western U.S. grid operators to work toward creating a real-time energy imbalance market (EIM) by October 2014. According to PacifiCorp and CAISO, the partnership will allow electricity to move across the power grid more efficiently and facilitate renewable energy growth in the western U.S.
Authorization to proceed with negotiating a formal agreement between the companies will be considered by the CAISO board of governors during its general meeting in March.
If the policy is implemented, PacifiCorp – which controls two balancing authorities primarily covering portions of six states, including part of northern California – will participate in a co-optimized real-time energy market facilitated by the CAISO. The joint agreement applies only to the EIM service; PacifiCorp is not joining the CAISO and will maintain control of its assets and responsibilities for serving its customers.
"Increased coordination of energy systems in the West is critical if we are to meet important challenges, such as ensuring reliability, keeping costs down for customers and effectively integrating renewable resources," says Greg Abel, PacifiCorp's chairman and CEO. "We're hopeful this agreement between PacifiCorp and the ISO signals a significant step toward broader coordination across the West."
Participants in the EIM voluntarily take advantage of generation resources across the entire EIM region, with the added benefit of more frequent dispatching in real time to optimize available energy supplies with actual power demand. Without an EIM, only generation assets within each balancing authority can be used to cover these short-term gaps.
Dramatic increases in the amount of wind and solar power in recent years require grid operators to hold more flexible generation in reserve to account for the variability of renewable resources, which are dependent on weather conditions, CAISO and PacifiCorp explain, adding that this announcement marks a step toward better management of current and future energy challenges.
The agreement between the parties initiates a public-input process as well as further analysis and negotiations between PacifiCorp and the ISO before full implementation of the expanded EIM.
The EIM would use computer technology to exchange electricity at five-minute intervals, instead of by telephone every hour, as was formerly the case, according to the American Wind Energy Association (AWEA), which issued a statement praising the announcement.
"We hope other utilities across the West will join this proven solution for reducing electric bills and allowing more clean energy onto the power grid," says Rob Gramlich, AWEA's interim CEO.
"This is the single most beneficial step that can be taken to use our existing power grid more efficiently," he adds. "In the year 2013, it is about time that electric companies that want to exchange electricity with their neighbors move beyond using telephone calls and manual processes to do so, while much of the rest of the country is using computers and automated processes."
An EIM that has been operated by the Southwest Power Pool for the last six years has already produced hundreds of millions of dollars in net benefits for consumers, according to AWEA.
"Extensive analysis conducted over the last several years indicates that implementing an Energy Imbalance Market across the western U.S. will yield around $1.5 billion in net benefits over its first 10 years," says Michael Goggin, AWEA's manager of transmission policy. "It is time for utilities and regulators to stop studying – and start implementing – this proven tool."