California ISO: Golden State can meet renewables goal by expanding power grid

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Final study results on the potential effects of creating a multi-state, regional electric market, released on July 12 by the California ISO show that by expanding the energy grid, California would reach its 50 percent renewable energy goal, while saving consumers up to $1.5 billion by 2030, the California ISO said.

“The studies’ conclusions mirror the preliminary results showing the benefits of expanding the ISO market, advantages we predict will only grow over time,” California ISO CEO Steve Berberich said in the July 12 statement. “We believe the findings in these studies will help drive the formation of a new, more efficient, cost-effective, and greener western electric grid. It’s also clear that a regional grid allows California and other states to eventually exceed their renewable goals, including California’s [50 percent] mark.”

The studies, which were conducted on behalf of the California ISO by The Brattle Group, Energy + Environmental Economics, Berkeley Economic Advising and Research LLC, and Aspen Environmental Group, were required under California’s Clean Energy and Pollution Reduction Act, or Senate Bill 350, which set the 50 percent renewable portfolio standard (RPS) by 2030, the California ISO said.

As noted in the “Senate Bill 350 Study,” to undertake the analysis, the study team needed to make several foundational assumptions, including that the California ISO’s Energy Imbalance Market (EIM) may expand to the regional market footprint with or without implementation of the ISO-operated regional market.

The study’s five baseline study scenarios consist of two 2020 scenarios and three 2030 scenarios. For instance, the “2020 Current Practice” scenario reflects near-term market conditions – California has developed the necessary resources to meet its 33 percent RPS, and the California ISO operates as-is, with no regional expansion. The “2030 Current Practice (Current Practice 1) scenario, for example, reflects longer term market conditions – California has developed enough renewables to meet its 50 percent RPS, with a current practice (in-state) procurement focus, and the California ISO operates only its current footprint, without regional expansion, the study added.

Discussing key findings of the Senate Bill 350 analysis, with respect to California ratepayer impact, greenhouse gas and other emissions, economic and environmental impacts, and impacts on disadvantaged communities, the study estimated an annual net benefit to ratepayers of $55 million a year in 2020 – assuming the regional market would only include the California ISO and PacifiCorp. That benefit grows to a baseline net benefit range of $1 billion to $1.5 billion a year by 2030 – assuming a large regional footprint that includes all of U.S. Western Electricity Coordinating Council (WECC) without the federal power marketing agencies (PMAs), the study added.

The market simulations undertaken show that California’s energy policy initiatives will reduce the emissions of greenhouse gases associated with serving the state’s electricity loads, the study said. The estimated CO2 emissions associated with serving California retail electricity loads – including CO2 emissions from imported power – will be about 63.6 million metric tons by 2020 – below recent historical levels of about 90 million metric tons per year in 2010-2013, and 107.5 million metric tons in 1990, the study said.

The study also noted that the impacts of a regional ISO-operated market are expected to create numerous and diverse jobs and economic benefits to California households and enterprises.

“We estimate that a regional market, growing from a [California ISO] plus PacifiCorp footprint in 2020 to the larger regional market by 2030, will create 9,900-19,300 additional jobs in California, compared to current practice, primarily due to reduced cost of electricity,” the study said.

Furthermore, the analysis for 2030 showed that implementing a regional market increases the efficiency of investments in low-cost renewable energy generation, including investments in new wind and solar resources to meet California’s RPS, the study said.

In addition, the study estimated that implementing a regional market with the California ISO plus PacifiCorp in 2020, and expanding to a larger regional ISO by 2030, would stimulate real income and jobs growth in most of California’s disadvantaged communities, particularly in the Inland Valley, Greater Los Angeles and Central Valley Competitive Renewable Energy Zones (CREZs). Real disadvantaged community incomes would increase by an amount corresponding to $170 to $340 of existing real annual household incomes, and total full-time employment would rise by 1,300 to 4,600 jobs between 2020 and 2030, the study added.

The study also noted that a regional market reduces the cost of maintaining reliability by reducing the need for load-following resources, operating reserves and planning reserves. A regional market improves integration of renewables to achieve California’s 50 percent RPS by reducing curtailments of renewable resources in a regional market – relative to current practices based on bilateral trading – and therefore would allow the state to build less renewable generating capacity – megawatts – to meet the same goals, the study said.

Noting that it will take a number of years to achieve a regional market of sufficient size to provide the available regional market benefits, the study said that “the sooner a regional market of sufficient size can be developed, the sooner California customers will be able to benefit from the investment and operating cost savings a regional market can provide – particularly as RPS mandates increase over time.”

Among other things, the study noted that a workshop for the ISO to present the proposed governance modifications and the results of the study is scheduled to be held on July 26 in Sacramento, Calif.

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