The US electricity sector is a bit of a mess.
The deregulation that swept through it in the 1990s and early 2000s was brought to a screeching halt by the Enron debacle. That left about half of US states and three-quarters of US ratepayers operating under deregulated systems, participating in regional energy markets overseen by independent system operators (ISOs).
These ISOs (sometimes called regional transmission organizations, or RTOs) do lots of things: oversee wholesale power markets, ensure that supply and demand are reliably balanced, plan for regional energy needs.
Thanks to their coordinated planning and large geographic footprint, markets administered by ISOs have also proven better able to integrate renewable energy. (See, for example, this study.)
The electricity system in the US West is cray
In the US West and South, however, deregulation never took hold. Those states still boast old-fashioned vertically integrated utilities. And in the West, only California is governed by an ISO:
So who does the planning and procurement in those western states? Individual utilities. Each has its own territory, in which it is the "balancing area authority" (BAA).
There are 38 — count 'em, 38 — separate BAAs in the western grid:
Each of these BAAs procures its own generation, builds its own power lines, and plans for demand within its borders.
That is goofy.
It might have made a little sense back when power plants could be built anywhere, in any territory. But these days everyone is trying to integrate more wind and solar — and you can't put wind and solar just anywhere. They work better where there's more wind and sun. They're going to be concentrated in certain areas, not always near big loads.
So for the region as a whole to integrate more renewable energy, it needs to be able to share that clean energy across large areas. The balkanized planning system in the West impedes that.
If all these BAAs were gathered under a single regional planning authority — an ISO — power could be shared much more efficiently. Transmission planning could link the best resources and the biggest loads across states. Rather than each BAA having its own backup power plants, reserve capacity could be shared across the region as well.
Integrating into larger grids just makes sense.
One planning authority beats 38
The benefits of western grid integration have been laid out in more detail in two recent reports. (See also an earlier post I wrote on California's need to export solar power.)
One is a short, approachable brief from Carl Zichella at NRDC. The other is a study by CAISO itself, which is in the midst of investigating regional integration. If you want an excellent deep dive into the nuts and bolts, I recommend this piece on Utility Dive, an industry news site, from contributing editor Herman Trabish (and his follow-up interview with the head of CAISO). I'm just going to briefly summarize.
The short story is that gathering the western grid under a single ISO would reduce renewable energy deployment costs, increase renewable energy deployment, reduce greenhouse gas emissions, and reduce local air pollutants. It would also create jobs in disadvantaged communities, avoid millions of dollars in unwise investments, and reduce costs for ratepayers.
It is, in short, a no-brainer.
CAISO estimates that by 2030, regional integration could provide California ratepayers between $767 million and $1.75 billion a year in aggregate benefits. Meanwhile, it would reduce region-wide greenhouse gas emissions by 10 to 11 million metric tons (about 3 to 4 percent of the total).
The case for integration will need to win over greens and utilities
As with many things in this fallen world, the fact that it's a no-brainer doesn't mean it's necessarily going to happen. The project faces suspicions from both environmentalists and state public utility commissions (PUCs).
Environmental groups are worried that the regional market would include a capacity market that might help old, outdated coal plants stay open longer. (The NRDC paper addresses this at length; in short, the western market doesn't need a capacity market, since it already has lots more gas plants than it needs.)
State PUCs in the West worry about their autonomy under an ISO — California would be the 800-pound gorilla on the western grid, with great influence over regional energy markets. PUCs fret about their ability to implement state procurement and reliability mandates (California is trying to get to 50 percent renewables; most surrounding states are not) if an ISO is doing the planning.
All these state PUCs will have to approve joining the market, which isn't out of the question but is going to be a long, delicate process.
Still, the benefits of integration are so clear, and serve so many distinct goals (reliability, cost, carbon reduction), that a unified western market seems, on some time scale, fated.
And it won't stop there. The very same benefits of integration that would come from a unified western market would also come from linking the western market up to the midwestern and Texas ISOs. Indeed, the only way to capture all the available benefits of integration is to create a unified national electricity market.
A national grid is a long way off, but it's a good long-term goal for climate hawks to keep fixed on the horizon. In the meantime, it's good to see California taking baby steps.