Value of energy imbalance market in the West significant, but could vary broadly

An energy imbalance market (EIM) between PacifiCorp and the California ISO (Cal-ISO) would bring between $21m and $129m in benefits in 2017, balanced against a preliminary cost estimate for setting up the EIM in the range of $3m to $6m, and estimated annual operating costs of $2m to $5m.

The figures were contained in a report prepared for the organizations by the consulting firm Energy and Environmental Economics, and which the organization issued jointly on March 13.

The benefit figures vary depending on the transfer capability between the two organizations. Researchers evaluated three transfer capability scenarios – 100 MW, 400 MW, and 800 MW – and calculated a range of benefits within each category. The estimated benefits of $21m accrue at the low end of the low transfer capability scenario, while the estimated benefits of $129m accrue at the high end of the high transfer capability scenario.

Figures in the 51-page report appear to support the conclusion that the two-party EIM provides a low-cost, low-risk means of achieving operational savings for both PacifiCorp and Cal-ISO and enabling greater penetration of variable energy resources.

The organizations noted that changes in the electricity industry in the western United States are making the need for greater coordination among balancing authorities (BAs) “increasingly apparent.” Working together through an EIM will advance the necessary collaboration.

The EIM is a balancing market that optimizes generator dispatch within and between BA areas using five-minute dispatch and leveraging the real-time dispatch market functionality that the Cal-ISO currently employs. The EIM will not replace the day-ahead or hourly markets and scheduling procedures that exist today, the report noted.

An EIM would allow both parties to improve dispatch efficiency and take advantage of the diversity in loads and generation resources between the two systems. Such efficiencies would reduce production costs, operating reserve requirements, and renewable generation curtailment, the report noted.

Such a market would bring benefits through interregional dispatch savings, which would be realized because of the greater efficiency of combined five-minute dispatch. Additional interregional dispatch savings would accrue through more efficient dispatching of PacifiCorp generators using the ISO’s automated system and nodal dispatch software.

Other benefits would include reduced flexibility reserves realized from the aggregation of the two systems’ load, wind, and solar variability and forecast errors.

An EIM will also help the region more smoothly integrate renewable energy and reduce renewable energy curtailment by providing BAs the option to export or reduce imports of renewable generation instead of curtailing such generation.

“Recent studies have suggested that it will be possible to reliably operate the current western electric grid with high levels of variable generation, but doing so may require supplementing the hourly bilateral markets used in the West toward shorter scheduling timescales and greater coordination among western BAs,” the report concluded. “Greater coordination would allow BAs to pool load, wind, and solar variability and reduce flexibility reserve requirements, and would increase flexibility and reduce renewable curtailment.”

The need for smoother integration of renewables is growing more acute each year, as renewable portfolio standards (RPS) already enacted in Western states are expected to result in some 60,000 MW of wind, solar, geothermal and other renewable generation in the Western Interconnection by 2022, the report showed.

PacifiCorp and the Cal-ISO announced a memorandum of understanding (MOU) on Feb. 12 that commits the organizations to work toward incorporating PacifiCorp into an expanded real-time EIM operated by the Cal-ISO by October 2014.

In announcing the MOU, PacifiCorp officials emphasized that the company would not be joining the Cal-ISO and would maintain control of its assets, as well as its responsibilities for serving its customers across two balancing authorities in the West, primarily covering portions of six states, including part of Northern California.

PacifiCorp serves approximately 1.7 million customers through its three business units, PacifiCorp Energy, Pacific Power and Rocky Mountain Power.