California ISO to begin testing energy imbalance market with PacifiCorp, NV Energy
After a month of simulation, financially binding operations will begin on November 1
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 U.S. 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 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 California ISO 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 California ISO switched from hourly to 15-minute interchange scheduling.
California ISO'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 California ISO footprint.
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. California ISO 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 California ISO and the PacifiCorp territories will initially use transmission capacity made available to the EIM by PacifiCorp and capacity currently under California ISO's operational control. For EIM-related power transfers between their footprints, California ISO 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.