By Robert Mullin

CAISO’s expansion into a multistate, regional electricity market could save California ratepayers as much as $1.5 billion annually while helping the state to meet or exceed its 2030 emission-reduction goals, according to a study commissioned by the ISO.

California’s Clean Energy and Pollution Reduction Act — the 2015 law that established the state’s 50% by 2030 renewable portfolio standard — required CAISO to perform an analysis of the economic, environmental and reliability impact of regionalizing the Western grid.

The study modeled three 2030 scenarios: one in which California meets its RPS without expansion and ones with a regionalized market with state- and regionally focused procurements. The last scenario offered the most significant benefits, according to the analysis, which was conducted by The Brattle Group, Energy and Environmental Economics, Berkeley Economic Advising and Research and the Aspen Environmental Group.

‘Compelling Message’

The benefits estimated in the study are in addition to those expected from CAISO’s expanded Energy Imbalance Market.

Development of a regional market could generate up to 19,300 new jobs for the state by 2030, more than half of which would be related to construction of renewables, the study found. Other jobs would be the indirect result of realigned consumer spending based on reduced energy costs.

Real income in California is expected to increase by $4.1 billion to $7.9 billion annually, while state tax revenues would rise by $600 million to $1.6 billion.

The study’s findings provide a “pretty compelling and simple message,” CAISO CEO Steve Berberich said.

“The electric industry in California is at an inflection point,” Berberich told reporters during a call Tuesday to discuss the report. “I think the state has the ability to enable a new paradigm where clean energy and economic growth become one.”

The study analyzed two regional market footprints: one including only CAISO and PacifiCorp and a second including all of the U.S. portion of the Western Electricity Coordinating Council except the two federal power marketing agencies there, the Bonneville Power Administration and the Western Area Power Administration. “These footprints are hypothetical and are designed to capture a plausible range of impacts,” the study notes. “We understand that the individual utilities and states will have to conduct their own evaluations of the benefits and trade-offs of joining a regional entity and to decide whether or not to join one.”

Regionalization would provide the ISO the ability to optimize generation over a larger footprint, allowing California “to go beyond” its 50% RPS, Berberich said. The study included the costs of storage and transmission needed to integrate renewables.

Fear of Curtailments

Without expansion, the ISO predicts periodic renewable curtailments of up to 13,000 MW — even with the expected closure of Pacific Gas and Electric’s Diablo Canyon nuclear power plant in 2025.

“Absent a regional market, we’re very concerned that we could see a lot of renewable energy curtailed because there isn’t an adequate market to sink the power,” said Keith Casey, ISO vice president for market and infrastructure development.

Casey noted that other RTOs in the U.S. are facilitating the development of “non-RPS” renewables — renewable projects built based on cost-competitiveness rather than in response to mandates. “For example, since 2000, wind generation accounted for 80% of 44,000 MW of non-RPS-related renewable generation additions nationwide, and 80% of these non-RPS-related wind generation investments (over 28,000 MW) took place in six states (Texas, Iowa, Oklahoma, Kansas, Illinois and Indiana), all of which are in ISO-operated market areas,” the report said.

CAISO’s study found that a regional market could eventually save California ratepayers  as much as $1.5 billion a year.

“We think this [expanded CAISO] market will provide a platform for renewable development to flourish,” Casey said.

Other highlights of the study:

• • • By 2030, the market would help California reduce electric sector CO₂ emissions by 4 million to 5 million metric tons per year — 8 to 10% below a scenario with no regional market. That would represent a 58% decline from 1990 levels.
    • Land use for building new wind and solar developments to meet California’s RPS would be reduced by up to 71,300 acres inside the state and 31,900 acres elsewhere in the West because of more efficient resource expansion. The study projects increased transmission construction outside California to support out-of-state projects.
    • A regional market would reduce water use by combined-cycle gas units in California and gas and coal plants in other areas of the West as a result of the more efficient dispatch of renewable resources.
    • The market’s larger operational footprint would allow for improved renewable integration through centralized control and increased awareness of neighboring areas. Lower requirements for load-following resources, operating reserves and planning reserves would lower costs for maintaining reliability.