Study: Western grid integration could produce cost savings

Western Regional ISO Integration enables coordinated grid operations across PacifiCorp and CAISO, unlocking cost savings, renewable energy efficiency, transmission planning benefits, and greenhouse gas reductions across Western states through market coordination and resource optimization.

Combining the electric grids operated by PacifiCorp and the California Independent System Operator to create a regional power marketplace could reduce energy costs by billions of dollars and help states meet their environmental goals, including California’s 50 percent renewable energy mark, according to a study released recently.

The study, commissioned by PacifiCorp and conducted by Energy and Environmental Economics E3, finds that integrating the two largest high-voltage transmission grids in the West, similar to a new transmission group initiative underway across the region, to create a regional ISO could produce between $3.4 billion and $9.1 billion in shared cost reductions in the first 20 years through better grid management and efficiencies gained by planning for the resource needs of a single, rather than multiple systems.

The study also projects that development of a regional ISO, building on the first western energy market model already piloted, is likely to reduce greenhouse gas emissions through coordinated planning, reduced curtailment of renewable energy, and lower overall costs to build new renewable resources.

"The study clearly highlights the benefits of a regional grid for all customers,” said Steve Berberich, President and CEO of the ISO. “It shows that a regional grid creates the opportunity to integrate higher levels of renewables more efficiently and effectively across a more diverse area through the energy imbalance market platform used for regional coordination. This regional approach is foundational to support the historic California SB 350 legislation and carbon reduction goals of nearby states.”

Agreement extended to look at costs, next steps. PacifiCorp and the ISO signed a Memorandum of Understanding in April to examine the potential benefits of creating a regional ISO, amid proposed market reforms in California, which included commissioning the benefits study recently released. The parties have extended the MOU to further explore costs and other requirements needed to achieve the benefits of integration outlined in the study, as well as to develop a transition agreement to outline the terms and conditions for the potential integration of PacifiCorp into a regional market.

“The report demonstrates clearly that a true regional grid in the West could provide significant benefits for customers,” said Cindy Crane, President and CEO of Rocky Mountain Power, a unit of PacifiCorp serving customers in Utah, Idaho and Wyoming. “We will continue to coordinate with stakeholders and regulators to ensure that moving forward is in the best interest of customers and our states.”

Both PacifiCorp and the ISO will receive input from regulators and stakeholders, and will need regulatory approval before full integration could occur. In addition, work will begin on establishing a new governance structure for a regional market as outlined in recently signed California legislation Senate Bill 350. Following market design and simulation tests, full integration could occur in late 2018 or in 2019.

Potential benefits. The study shows how creation of a regional ISO would benefit customers of both PacifiCorp and the ISO. PacifiCorp’s customers, for instance, would benefit primarily from savings in fuel and energy procurement costs, while ISO wholesale customer savings would come from procuring lower cost clean energy and mitigating the negative impacts of oversupply of renewable energy on the system, as wholesale electricity costs have fallen historically.

Annual gross cost savings in 2024 for PacifiCorp and ISO customers could range from $153 million to $355 million, increasing to $402 million to $1.2 billion in annual savings in 2030.

“Over the first full 20 years, assumed here to be 2020 to 2039, we estimate the PacifiCorp and ISO integration would yield $1.6 to $2.3 billion in total present value incremental savings for PacifiCorp, and $1.8 to $6.8 billion for ISO customers,” according to the study.

“The quantified benefits for both PacifiCorp and ISO customers are sufficient to support continued progress toward PacifiCorp and ISO integration,” the report concluded.

In response to the California Independent System Operator's announcement that western grid integration could produce significant cost savings, environmental benefits, the President of the California Public Utilities Commission, Michael Picker, issued this statement:

“The benefits look promising and underscore the value of moving to a more diverse mix of renewable resources for meeting California’s 50 percent renewable generation goal. I look forward to seeing the additional work being done to address environmental and job issues as well as how costs will be fairly allocated across a larger region.”

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