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CAISO and PacifiCorp Agreement Paves Way for Lower Cost Solar Integration

Solar — and renewable energy in general — just got a step closer to mainstream with a recent announcement that the California Independent System Operator (CAISO) and PacifiCorp, a utility serving 1.7 million customers in 6 western states, entered into a memorandum of understanding to create what's known as an Energy Imbalance Market by October 2014.

While this may not sound like exciting news, the implications for integrating renewable energy into the electric grid are profound.  You see, utilities must match consumption and production of electricity in real time to ensure stability of the grid.  While most utilities in the West do this manually, ramping reserve generation up or down to meet demand, the CAISO does this via an advanced, automated 5-minute market system. 

Utilities have often complained that solar PV and wind are too variable (with energy production varying as clouds pass in front of the sun and wind rises and falls), making it more difficult and costly for them to perform this balancing act.  But study after study have shown that geographically dispersed PV and wind resources significantly reduce this variability.  So the bigger the geographic footprint, the easier it is to integrate variable resources. 

Furthermore, by sharing reserve generation (typically gas turbines) across a broader region and dispatching energy every 5-minutes rather than every hour as is common practice outside the CAISO, utilities can significantly reduce the amount of reserves needed, thereby reducing the costs for balancing production and consumption.

An effort to create a voluntary imbalance market across the entire Western Interconnection has been underway for the past three years, but CAISO and PacifiCorp, recognizing the significant savings potential, just jumped ahead of the pack with Tuesday’s announcement.  Of course, the CAISO Board of Governors must still approve the MOU and then a detailed operating agreement must be worked out and approved by the Federal Energy Regulatory Commission, but CAISO and PacifiCorp have set a rather aggressive timeline for the start of operations by October of next year.  This opens the door for other utilities to join the party shortly thereafter, possibly by 2015.

To put the potential savings in perspective, a study performed by the National Renewable Energy Laboratory from November of last year estimated the savings of a west-wide energy imbalance market to be between $150 to $300 million annually.  That’s savings that could go back to ratepayers around the West.  Importantly, such a market makes it significantly easier to integrate renewable energy across the entire region at lower costs.

That, my friends, is real market transformation.  Kudos to CAISO and PacifiCorp for breaking through the gridlock and taking the first step in the right direction.

Lead image: Countryside road via Shutterstock

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