A controversial plan to expand grid markets throughout the
Western U.S. gets a generally positive review in a new report—but with
important warnings attached.
Should California expand its energy markets to incorporate
the rest of the Western United States?
This vital question for California’s energy future has been
the subject of vigorous debate for years now. Supporters say it will allow
California to access ever-cheaper wind and solar power from across the region,
driving down energy costs and boosting jobs and the economy, while pressuring
uncompetitive fossil-fuel-fired power plants to shut down.
Opponents fear it will drive renewables investment and jobs
out of state, support coal plants owned by Rocky Mountain states utility
PacifiCorp and others, and open California grid operator CAISO to losing its
independence to determine its own clean energy and carbon reduction
future.
The debate moved into sharp focus as of last
month, when
state legislators passed through a key committee a bill (AB 813) that
would take the first steps toward creating a new regional energy market, giving
it a chance to be brought to a vote before an August 31 deadline.
This week, the nonpartisan Next 10 Foundation released a
report, A Regional Power Market for the West: Risks and Benefits,
that weighs both sides of this debate, and largely finds that the benefits of
grid regionalization outweigh the potential negative effects.
That’s largely because the report finds that the positive
effects of regionalization — up to $1.5 billion per year by 2030 in
reduced energy costs in California due to more competition, economies of scale,
and cheap regional wind and solar power — outweigh the projections of
losses for in-state renewable energy investment and jobs.
“Lower costs come from developing the best resources in the
region, rather than restricting development to California,” report author
Bentham Paulos wrote. “On the whole, studies say that regionalization would
lead to greater job growth in California.”
As for the concerns that changing CAISO to a regional entity
could undercut California’s control, the report notes that CAISO is already
regulated by the Federal Energy Regulatory Commission (FERC). That fact that
doesn’t change whether its board is appointed by California’s governor, as is
true for CAISO today, or appointed via an independent commission, as is the
case for the rest of the country’s grid operators.
“Because it has been responsive to state policy goals, some
people think of it as a state agency, regulated by state policymakers. But it
is not, and hasn’t been for almost two decades,” Paulos wrote. “A regional
transmission organization, just like CAISO, would have to operate under a
framework of FERC orders and federal law that require cooperation, free trade,
and fair competition.”
In an interview this week, Paulos also noted that AB 813, if
passed, “doesn’t just wave a magic wand and create a regional market.” Instead,
it simply “sets the conditions under which California utilities can join a
regional transmission organization,” he explained. “The California legislature
can’t tell any other state what to do, but they can tell their utilities what
to do. That’s the leverage that the legislature has, and that’s the reform
mechanism” in play.
Jon Wellinghoff, former chairman of FERC, and Mike Florio,
former California Public Utilities Commissioner, as well as members of groups
both for and against regionalization, also advised Next 10 in its report.
The report was welcomed by groups like the Natural Resources
Defense Council and Vote Solar, which have been arguing
in favor of regionalization for the past three years.
However, Paulos also highlighted certain caveats to the
report’s conclusions.
First, it does not include an analysis of a future in which
California gets much of its energy from distributed energy resources such as
rooftop solar PV, demand response or energy storage. That’s because, as he
states in the report, “unfortunately, a distributed-intensive scenario was not
included under the SB 350 studies mandated by the state to investigate a
Western RTO, nor has it been adequately studied by other agencies, labs,
universities, or think tanks.”
“On a technical level, a regional grid and a lot of DERs are
really substitutes for each other — or could be,” he said in the interview. But
without a DER-rich scenario to compare to the various bulk power-focused
analyses included in the report, Next 10 was unable to measure how well
DERs might serve to defer transmission-scale needs.
The Clean Coalition, one of regionalization’s
biggest opponents at present — and a participant in the Next 10
report — has argued that California could obtain the same benefits of
regionalization through DERs, without the risks and downsides.
Clean Coalition has also said expanding the regional Energy
Imbalance Market, which has provided about $350 million in benefits by allowing
California and other Western U.S. utilities that operate transmission systems
to trade in a real-time market, is a more prudent move than pushing ahead with
a regional authority.
Paulos also raised one more wild card in the regionalization
analysis: the potential politicization of FERC by the Trump
administration.
“Watching FERC these days is a real moving target,” he said.
“All these Trump appointees, people aren’t really sure what they’re going to
do. Is it going to be as politicized as the EPA? So far it hasn’t been,” he
said, noting FERC’s
unanimous rejection of Energy Secretary Rick Perry’s plan to force
regulations that would guarantee payments for uncompetitive coal and nuclear
plants in the name of grid resilience.
However, FERC’s
recent split decision to force grid operator PJM to remake its
capacity markets, in ways that could limit participation by state
policy-supported resources including nuclear, wind and solar, has left many
FERC watchers uncertain over its impact on clean energy policies across the
country, he said.
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