An RTO could provide Oregon with economic, planning and operational benefits, but it would not serve as a “universal problem-solver” for the growing challenges facing the state’s electricity system, according to a study the Oregon Department of Energy (ODOE) delivered to the state legislature Monday.

And bringing Oregon into an RTO would present challenges of its own, the report says. Chief among them: ensuring a market and governance design that balances the state’s “diverse interests,” guarantees a “meaningful role” for those interests, and preserves state clean energy and equity goals.

But the ODOE study also casts a favorable light on Oregon’s increased participation in regional collaboration across the power sector. It highlights the various regionalization efforts already taking shaping across the Western Interconnection and emphasizes the importance of Oregon entities continuing to play a role in their progress.

It also points out that, unlike previous efforts to develop organized electricity markets in the West, “the current momentum toward increased regionalization has a unique sense of drive and urgency … driven by transformational changes in the electric sector — from the rapid deployment of increasingly cost-effective wind and solar energy, to the retirement of coal plants in Oregon and across the West, to the adoption of state clean energy mandates.”

In developing the study, ODOE said it “identified broad common interest among Oregon stakeholders” to build on that momentum “to explore increased regional collaboration and coordination in the electric sector.”

The study also advises lawmakers that the “nuanced perspectives” among various stakeholders “would need to be carefully considered in designing an RTO that could deliver benefits to Oregon retail customers.”

Incrementalism

The ODOE study was a requirement of Senate Bill 589, which state lawmakers passed last spring just as other Western legislatures primed the push for regionalization by approving bills requiring their state’s utilities to form or join RTOs by 2030. (See Many Next Steps to Follow Passage of Nevada Energy Bill and Polis Signs Bipartisan Bill to Support Interstate Tx.)

A Colorado Public Utilities Commission study released early this month, the product of a 2019 law, found that utilities in that state could save between $50 million and $230 million annually from joining an RTO. (See Colo. PUC: State Could Save up to $230M in Wholesale Market.) A different multistate-led study published earlier this year found the West as a whole could save up to $2 billion a year by 2030 through the development of a single RTO. (See Study Shows RTO Could Save West $2B Yearly by 2030.)

But ODOE was not charged with creating an economic benefits report, nor was it expected to make recommendations about whether the state should compel its utilities to join an RTO, Adam Schultz, electricity and markets policy lead at the department, said during the first meeting of the state’s RTO Advisory Committee, whose representatives helped guide development of the study. (See Oregon RTO Committee Ponders Paths to Regionalization.)

Instead, the goal was “to gather and synthesize the range of perspectives on the benefits, costs, opportunities, challenges and risks of RTO formation that exists among a diverse range of Oregon stakeholders to inform the state legislature and other interested parties,” Schultz said.

In that vein, the ODOE study provides lawmakers with a primer on RTOs, describing the role of an organized market in the buying and selling of energy, the procurement of capacity (or not), and the planning and operation of transmission networks.

The study also outlines the regionalization efforts already in motion. “Given recent industry trends, including coal plant retirements and the need for flexible capacity that can integrate increasing amounts of variable wind and solar generation, significant momentum has built in recent years to increase regional cooperation,” the report said, citing CAISO’s expanding Western Energy Imbalance Market (WEIM), SPP’s increasing market offerings in the West and the Northwest Power Pool’s (NWPP) Western Resource Adequacy Program, which will roll out next year. (See Implementation Underway for NWPP’s Western RA Market.)

Membership in an RTO would represent a qualitative step beyond those efforts because conventional organized markets require member utilities and transmission owners to surrender operational control of their transmission systems to a central operator, which would also assume the role of grid planner.

The ODOE study highlighted a debate that occurred within the RTO Advisory Committee, in which Ravi Aggarwal, a manager with the Bonneville Power Administration, urged the region to take “a more incremental and staged approach” to forming an RTO, given that the “three-legged stool” of planning, resource adequacy and markets are all currently being served by NorthernGrid, NWPP and the WEIM, respectively.

“Some committee members believe that the incremental steps to increase regionalization could lead the region to formation of an RTO. The incremental approach may be helpful and necessary to build the trust required among a diverse set of stakeholders to make formation of a sufficiently large and well governed RTO possible,” the study said.

Other members said an incremental approach could allow participants to take an “a la carte” approach to regionalization, “participating only up to their comfort level up to and including membership in an RTO.”

But still other members were wary of such an approach, the study pointed out, warning that it could fail to deliver the full benefits of an arrangement that coordinates many functions within a single body. “The region may also be approaching the limits of how many additional incremental steps (and therefore additional benefits) can be bolted-on to the status quo,” the report said.

The report also advised that while RTO formation could yield operational benefits for the transmission system, particularly through improved utilization and transparency, it would not necessarily solve challenges around cost allocation, siting or permitting.

“Multiple members of the committee noted the development timelines for major new transmission projects can often be in the 10- to 20-year range due primarily to challenges around siting and permitting. An RTO would not necessarily resolve these timeline challenges,” the study said.

The report additionally pointed to an RTO’s potential to improve utilization of existing renewable resources through reduced curtailments, as well as its ability to provide customers with greater access to low-cost out-of-state renewables. However, committee members widely agreed that state policies and declining costs would continue to drive the adoption of renewables regardless of the existence of an RTO.

Comes Down to Design

But the ODOE study advised lawmakers that the key challenge to forming an RTO would be political rather than technical or operational.

“One of the key perspectives shared by committee members was the criticality of negotiating the details of market design and governance structures to weigh trade-offs, balance multiple interests, and identify pathways to achieve optimal outcomes,” the study said. Those trade-offs would occur in and among:

• states, with their varying policy priorities and regulatory requirements;
• load-serving entities, which in Oregon consist of three investor-owned and 38 consumer-owned utilities;
• independent power producers, power marketers and transmission owners;
• advocacy organizations, such as trade groups, environmental and social justice organizations, and labor unions; and
• retail customers.

An RTO would also have to contend with the presence of BPA, which owns and operates about 75% of the region’s transmission system.

“This makes BPA a critical but largely voluntary participant in regional conversations around RTO formation, although the actions of neighboring utilities in the region or of other parts of the federal government (e.g., [the U.S. Department of Energy], FERC or Congress) can affect the decisions of BPA,” the report said.

It also cautioned lawmakers that “careful design” of an RTO would be necessary to prevent an erosion of state authority while also helping Oregon to achieve its environmental policy objectives.

RTO Advisory Committee members generally agreed that an RTO would provide an “additional tool” for helping Oregon achieve its target of generating 100% emissions-free electricity by 2040, according to the report.

“Several members of the committee went even further to suggest that RTO formation may be necessary to achieve those targets,” the report said.