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Moving Beyond the State of California at CAISO

Peter Asmus — December 23, 2015

The California Independent System Operator (CAISO) is one of nine independent wholesale grid operators in North America. Today, roughly two-thirds of the U.S. electrical grid is managed by independent system operator (ISO) entities, which manage and coordinate all generation resources, including the large and rapidly growing amount of variable renewable resources.

California’s recent passage of legislation increasing the target for meeting 50% of total state demand for electricity from renewables by 2030 underscores why the CAISO is moving in new directions that will likely require a name change as it expands its access to out-of-state resources.

ISO Control Areas for North America

Peter CASIO Blog 1

(Source: California Independent System Operator)

Various studies—including one from the Regulatory Assistance Project—confirm that these impartial grid operators lower overall costs of power supplies, as well as enhance the environmental performance of the power sector. With current trends toward coal plant retirements and the subsequent increase in reliance upon variable renewables such as solar and wind power, it turns out, however, that bigger is indeed better.

Since I am a strong advocate for decentralized distributed energy systems such as microgrids, this may seem like an odd argument to make. To put this statement in context, consider the following truism I learned while researching my book on wind power: the larger the control area for a balancing authority such as a utility or an ISO, the less an issue the variability of wind. Why? Chances are that the wind will not all die at once if you can manage this resource over a large swath of wind resource areas. This general axiom also applies to solar energy, though the dynamics are different.

Today, CAISO serves an estimated 35% of the electric load in the West, but this number is expected to grow steadily over the next several years due to the creation of two new organized markets designed to help the state meet its aggressive energy goals, programs highlighted at the recent Paris Climate Summit.

The two recent major market expansions by CAISO are:

  • Energy Imbalance Markets. CAISO is now reaching out to utilities outside of its traditional control footprint to purchase ancillary services. The Energy Imbalance Market (EIM) improves the efficiency of dispatching resources by using devices and sophisticated software systems that analyze the needs of the grid every 5 minutes and automatically find the lowest-cost generation to meet demand. Without an EIM, utilities have to meet demand with resources in their own service areas, which can translate into having to start higher-priced generation or dip into even more expensive energy held in reserve.

CAISO Energy Imbalance Market Participants (Partial List)

Peter CASIO Blog 2

(Source: California Independent System Operator)

  • Regional Energy Markets. An even more dramatic step by CAISO is creation of a fully integrated Regional Energy Market. The control area of CAISO may encompass many new partners. The first step is to integrate with the system resources of PacifiCorp, which has control area of over 11 GW of resources in Oregon, Washington, Idaho, Nevada, and Wyoming. The diversity of resources available in these states, ranging from hydro to wind and fossil fuels, will help diversify the energy economy managed by CAISO. Benefits of this integration include resource procurement savings, lower peak capacity needs, and more efficient unit commitment and dispatch.

Given these looming changes, CAISO will need a new name. This is just speculation, but I would bet it will rebrand itself as the Western Regional Independent System Operator (WRISO) at some point in the future.

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