Can a multi-state energy grid avert power outages in California?

The pair of statewide power outages in August that hit the Golden State for the first time in nearly 20 years has resurrected the debate over whether California should join other states in the West and form what supporters say would be an “enhanced” regional power grid.

“It’s really going to be important to have the rest of the West more tightly integrated to California,” said Scott Miller, executive director of the Western Power Trading Forum, a Sacramento-based organization whose members buy and sell power. “The best way to do this is if everybody is sharing the resources, using the same rules for dispatch, the same market signals and things like that.”

But skeptics say, not so fast.

“What I hear is people taking advantage of the crisis to advocate for their pre-existing agenda on this topic,” said Matthew Freedman, staff attorney for the San Francisco ratepayer advocacy group, The Utility Reform Network. “There are a lot of unanswered questions about how a regional transmission operator would preserve California’s autonomy and sovereignty.”

Two years ago, then-Gov. Jerry Brown pushed the Legislature to pass a bill to expand the state’s grid operator’s responsibilities to 14 states in the West. But Brown’s hopes of signing Assembly Bill 813 before he left office were dashed when the bill, after passing the Assembly, did not receive a vote on the Senate floor before the 2018 session ended.

Since taking office, Gov. Gavin Newsom has not taken a stance on the issue, and no legislation has been been offered in the last two sessions. But that has not stopped the topic from being debated, bringing back many of the same arguments made before by supporters and critics.

A regional grid already exists

In the electricity grid, system operators — or balancing authorities — have to balance supply and demand instantaneously, generating every kilowatt that is demanded by customers who expect their lighting, heating, and air conditioning to come on the moment they flip a switch.

Grid operators take part in what is called a day-ahead market in which bids for energy supplies are submitted ahead of time in 24-hour segments. In addition, California, since 2014, has been a member of the Western Energy Imbalance Market, which allows participants to re-balance the grid in five-minute segments in real time.

The California Independent System Operator, or CAISO for short, oversees the power grid for about 80 percent of the state. Six years ago, the CAISO developed the Energy Imbalance Market and pitched it to every balancing authority in the West. The first utility to accept the invitation was PacifiCorp, which has power companies in states such as Utah and Oregon.

Since then, the system operators in states including Nevada, Arizona, Wyoming and even British Columbia have joined the Energy Imbalance Market.

By automatically identifying lower-cost resources from one operating system to another in real time, the imbalance market has helped reduce costs, integrate more renewable sources and save money for utility customers. The CAISO recently touted savings of $1 billion since the market’s inception in November 2014.

But energy transfers between participants is limited to available transmission capacity, and congestion can build up, like cars and trucks stuck in traffic on a highway.

So supporters of an expanded regional grid want to enhance the day-ahead market so it is as easy to use and as cost-effective as the imbalance market.

“A regional grid would cut costs even more,” said Ralph Cavanagh of the Natural Resources Defense Council, an environmental group. “There are some plants that just can’t adapt on a 10- to 15-minute basis. If you can look at a full day, you will get many more options for reducing costs and many more options for using low-cost renewables.”

Integrating renewable sources is important because solar production in California is so plentiful that grid operators sometimes have to send the excess to adjacent states like Arizona or curtail it altogether.

“We still have a severely fragmented Western grid with 38 separate balancing authorities when what we need is enhanced integration,” Cavanagh said. “The Energy Imbalance Market does help improve coordination across the system but it doesn’t eliminate the fragmentation.”

Skeptics say the argument is not about coordinating California with other states in the region.

“We’re already integrated,” Freedman said. “The question is, what are the terms of engagement between California and the rest of the West?”

Among their concerns is whether the creation of a regional transmission operator would result in California’s priorities getting stifled by states with different preferences. For example, Wyoming is the largest producer of coal in the U.S. while California has so aggressively moved to eliminate it that coal made up just .12 percent of in-state generation in 2019.

“The notion that the CAISO has to become a single regional entity no longer controlled by California, but part of a regional stakeholder process seems like the wrong way to go,” Freedman said. “We still have pretty big disagreements with a lot of other Western states about energy policy.”

Conversely, skeptics of the plan in other states worry that California’s sheer size and influence in an expanded regional grid would overshadow them.

 

Would a regional grid help prevent blackouts?

Then there’s the discussion around the rotating outages on Aug. 14 and 15. The CAISO ordered utilities across the state to shut off power as a stubborn heat wave increased energy demand when customers turned on their air conditioners. The outages came as solar production into the electric system ramped down as the sun set.

CAISO officials blamed a combination of factors:

  • Since the heat wave also affected the entire West, hoped-for energy imports from other states did not go to California, as states kept that power to themselves.
  • A pair of power plants in California tripped offline over the course of those two days, taking valuable megawatts of power with them.
  • And since the heat wave was accompanied by very little wind, energy production from wind farms took a nosedive.

Some have questioned the CAISO’s decision, saying the grid operator had enough reserve power when it ordered the Stage 3 Emergency. The CAISO, the California Public Utilities Commission and the California Energy Commission are preparing a report for Gov. Newsom to explain what happened and why.

The Energy Imbalance Market alone would not have helped much during the blackouts because it is not designed to bolster grid reliability — the transactions between participants is purely an economic exchange.

“With a fully integrated Western grid, you have better coordination of reserves” when the grid is severely stressed, Cavanagh said. “You have better region-wide planning in general to deal with extreme events. A fragmented grid is much less effective in identifying potential stresses on the system and avoiding them at the lowest possible cost.”

Freedman isn’t buying it.

“How would a single regional transmission operator have resulted in more generation available to California to serve our needs in real time?” Freedman said. “The problem was insufficient capacity.”

Going forward

The debate persists as the power mix among Western states continues to evolve.

Nearly every state in the West has adopted renewable energy mandates and zero-emission targets for their utilities, such as those adopted in California. PacifiCorp has pledged to shut down more than 75 percent of its coal fleet in the states its serves by 2038.

An increasing number of natural gas plants in California have closed or will be shuttered. The state’s last remaining nuclear power plant — Diablo Canyon near San Luis Obispo — begins to shut down operations in 2024. By itself, Diablo Canyon accounts for 8 percent of California’s in-state electricity generation last year.

With those changes coming, Miller of the Western Power Trading Forum said the need for fewer restrictions on energy sources between California and other states will be critical.

“Without all the resources being in sync and being dispatched in sync,” Miller said, “and without having the same rules in place, I can’t imagine reaching” California’s goal to derive 100 percent of the state’s electricity from carbon-free sources by 2045.

An expanded regional grid would be regulated by the Federal Energy Regulatory Commission, known as FERC, just as the agency regulates regional transmission organizations across the country. FERC also regulates the CAISO.

In the aftermath of last month’s outages, former FERC commissioner Cheryl LaFleur wrote an analysis and among her recommendations for California included taking part in an enhanced regional market.

But a number of recent FERC rulings have generated complaints from some states — particularly in the Mid-Atlantic — who say the decisions have undercut their clean energy policies.

“There’s just so much chaos around this that it seems like the wrong time for California to dive in and say that it would be happy to give up its oversight and authority,” Freedman said. “Instead, we think it its far better for California to take incremental steps toward additional coordination — and also figure out exactly what happened with these recent outages and what resources we need to bring online in the future to ensure they don’t happen again.”

The CAISO has formed a committee to look into the details of implementing an enhanced day-ahead market, possibly by the fall of 2022.