Navigant Research Blog

Moving Beyond the State of California at CAISO

— 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.

 

Solar in the Sahara

— December 7, 2015

Set to become the largest concentrated solar power (CSP) plant in the world, Morocco commissioned the first phase of its Noor-Ouarzazate project in November 2015. This 160 MW installation is just the first of four projects that will constitute the larger 580 MW plant. Located on the edges of the Sahara Desert in Ouarzazate, this project aims to ultimately provide power to up to one million people. Large-scale solar projects such as this can provide an array of benefits to nations across the Middle East & Africa. Along with providing reliable electricity access to developing countries, these types of clean technology projects may help mitigate some of the tension and conflict that persists throughout the region.

Rather than utilizing traditional PV technology, the first three projects will use CSP through parabolic mirrors and a trough system to track the sun across the sky during the day. CSP also comes with the benefit of thermal storage, allowing for the prospect of 24/7 solar energy. This will be supported further by the second phase of the project, Noor 2 (200 MW) and Noor 3 (150 MW), set to come online in 2017. The third phase will consist of a PV power station. This complex will be largest CSP plant in the world upon completion, marking a significant milestone as countries in the region begin to adopt solar into their energy portfolios.

Morocco is taking advantage of any opportunities where the Sahara is concerned. The world’s deserts receive enough solar energy in 6 hours to meet the power demands of humanity for an entire year. How to harness and distribute this energy in a cost-effective manner is a significant challenge. Morocco has been able to pursue this project through a mix of political will and falling solar costs. The Moroccan government is choosing to view climate change as an opportunity and ultimately hopes to use the Noor complex as a means to export electricity across the Middle East and Europe. This path toward energy independence is critical in a region where climate security is expected to pose a major problem in the future. Should this project prove successful, it can provide a template for surrounding nations as they begin their forays into solar. According to the University of Oxford Middle East energy expert Justin Dargin, large-scale integration of renewable energy could significantly reduce the budgetary outlays of countries in the Middle East & Africa, allowing increased funding for social services, infrastructure, and more. This reallocation of funds could be used to address some of the socioeconomic demands highlighted during the Arab Spring.

Morocco has set an ambitious target of generating 42% of its electricity using clean energy sources by 2020. Whether fellow countries in the region will follow suit with similar environmental initiatives is yet to be seen, but the Noor complex is a significant step in advancing large-scale solar integration across the region.

 

State-Regulated Energy Efficiency and Renewable Energy Use in California

— December 2, 2015

California’s newest energy bill, senate bill (SB) 350, passed 26 to 14 and was signed into law on October 7. The Clean Energy and Pollution Reduction Act of 2015 aims to increase the Renewable Portfolio Standard (RPS) to 50% by 2030 (up from the previous target of 33%), establishing that a percentage of electricity be generated by renewables and requiring an increase in energy efficiency in existing buildings by 50% by 2030. The bill originally proposed to cut petroleum use by 50% by 2030, but this was removed from the bill shortly before it was passed. The bill supports a previous order by Governor Edmund Brown reducing greenhouse gases by 40% below the 1990 levels by 2030.

According to the American Lung Association, the top five ozone and particle polluted cities in the United States, both year-round and short-term, are in California. Senator Kevin de León, the author of the bill, stated at the signing ceremony in Los Angeles that, “with SB 350, we are making clean power sources like wind and solar the mainstream, democratizing the benefits to our economy and environment. … Soon, those communities living in the shadows of smokestacks and freeway overpasses will breathe a little easier.” Funded by the Los Angeles Department of Water and Power, Pacific Gas and Electric Company, the Sacramento Municipal Utility District, San Diego Gas & Electric Company, and Southern California Edison Company, a study by Energy and Environmental Economics, Inc. concluded that achieving the 50% RPS set forth by SB 350, while aggressive, is feasible. The study found a number of short-term solutions, including increased regional coordination, increasing the diversity of renewable resources, and energy storage.

Impact on Utilities

Austin Whitman, Director of Regulatory Affairs for FirstFuel Software, stated that the benefits of SB 350 to utilities include an increase in data-driven improvements. Utilities will need to reduce demand hour-by-hour, not just on a yearly basis.

SB 350 requires the State Energy Resources Conservation and Development Commission to establish annual targets for energy efficiency savings, the California Public Utilities Commission to establish efficiency goals for private utilities, and the California Energy Commission to do so for municipal utilities. ReedSmith explained that while these commissions are required to set annual targets, the local, publicly owned electric utilities are required to set annual targets for energy savings and demand reduction. Utilities are encouraged to participate in cost-effective activities, such as peak load reduction. The bill is expected to transform the independent system operator (ISO), which is required to propose modifications to the states legislature for approval, in to a regional organization. The bill stresses the importance of the use transportation electrification (TE) and increase’s the state’s authority to direct investor-owned utilities to implement TE, which will likely create a plethora of new programs.

California as a Test Pilot

The regionalization of the ISO is intended to encourage the growth of regional electricity transmission markets in western states, which will increase access to customers within these areas. The ISO must conduct additional studies on the impacts of a regional market enabled by the proposed governance modifications. If the studies are found successful, it is likely this could be adapted with other states and even neighboring countries, as well.

California has continually been leading the country—and the world—in its efforts to fight climate change. A 50% RPS is the highest anywhere worldwide, and all eyes will be focused on California to see how these goals can be achieved by 2030.

 

Oregon State Energy Policy Leadership Back on Display

— November 30, 2015

Oregon has a long history of innovative firsts across the social, political, and business spectrum with regard to energy. Below are some notable examples of Oregon energy state policy leadership:

  • In 1919, Oregon became the first state to initiate a gas tax, and the rest of the country followed its example in repairing roads. Now rolling out a trial pay-as-you-drive tax called OReGO, the state is incentivizing its citizens to drive less. In 2011, per capita use of gasoline in Oregon fell to its lowest level since 1962.
  • Oregon was the first West Coast state to pilot a floating offshore wind farm in Coos Bay.
  • The state is home to Shepherds Flat, one of the largest wind farms in the world at 845 MW. Shepherds Flat has more than 300 2.5 MW General Electric (GE) wind turbines.
  • Portland was the first U.S. city to adopt a climate change plan, called the Global Warming Reduction Strategy. In 2010, Oregon hit its 2010 emissions target.
  • In 2007, the state legislature passed numerous pieces of clean-energy legislation in electricity, biofuels, and other sectors that led to the arrival of Vestas, Iberdrola, SolarWorld, and other industry leaders.
  • Oregon’s only coal plant, Boardman, is expected to be converted to biomass by 2020.

However, since the financial crisis and amid challenging market conditions both locally and globally, there have been lulls in legislation and activity that previously gave Oregon its credibility in the energy sector.

There are two new initiatives facing voters in the coming ballot cycle. Initiative Petition 63 aims to increase the state’s renewable portfolio standard from 25% by 2025 to 50% by 2040, which would make it one of the top five most aggressive among U.S. states and territories. The initiative would also ban coal electricity imports, which, when combined with the planned phaseout of coal generation in the state, would make the state coal-free by 2030. Initiative Petition 64 is similar, but it also ties these results to executive compensation, which is the first approach that I have seen tied to energy policy, anywhere.

Initiative Petition 64

Dexter Blog Quote

 (Source: Oregon Initiative Petition 64)

To be sure, many other aggressive state-level efforts have seen strong innovation on the policy front and have enjoyed various levels of success. One differentiating factor that makes Oregon particularly unique on the local implementation front, however, is the massive hydroelectric system in the Columbia River Gorge. This system provides about half of the state’s power (and does so cheaply), and has been somewhat of a barrier to the larger uptake of non-hydro renewables at the residential, commercial, and industrial levels.

Voters have consistently voted with their dollars, and Oregon is home to one of the highest percentages of green power program subscribers—where customers pay approximately 10% more on their electric bills in order to support renewable energy projects in the state. Similarly, polls associated with these new ballot initiatives found that 71% of Oregonians supported the bills, and that 58% said they supported the proposal even if it would increase their energy bill. This flies in the face of conventional wisdom that voters are unwilling to put their money where their mouth is, and is instead representative of most of the state’s population. The positive economic impacts of wind and biomass power in rural areas has led to progressive energy legislation being passed.

Many groups outside of Oregon will be watching closely to see if these initiatives pass, and this underscores not only the importance of policy to keep the state on the front lines of statewide energy policy, but also its potential for the rest of the United States.

 

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