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CAISO Report Shows Benefits of More Regional Energy Market Coordination Among Western States

by Heidi Ratz

Larger energy market footprints and comprehensive structures for regional grid cooperation would maximize cost savings and other benefits for Western states, according to a study released this week by the California Independent System Operator (CAISO). The report, The Impacts on California of Expanded Regional Cooperation to Operate the Western Grid, was initiated in response to California’s Assembly Concurrent Resolution (ACR) 188

The resolution, passed in August 2022, called for CAISO to produce a report for the California Legislature by February 28, 2023, on the potential benefits of expanded regional cooperation with California. CAISO worked with Western balancing authorities and engaged the National Renewable Energy Lab (NREL) to prepare the report and incorporate stakeholder feedback. 

The report evaluates and synthesizes recent relevant studies on the impact of regionalization on transmission costs and reliability for California ratepayers. As required by the resolution, the report also discusses regional transmission organization efforts in Colorado and Nevada, as well as “other regional collaboration between states on energy policies to maximize consumer savings while respecting state policy autonomy, and engagement between neighboring states on the future of regional transmission organizations in the West.”

The final report provides an independent assessment of the benefits that would stem from new energy markets that allow coordination between California and other Western states. A multistate study cited in the report estimates that a West-wide market operated by a regional transmission organization (RTO) would provide significantly more benefits than centralized day-ahead markets alone and produce $833 million in annual savings through reduced electricity production costs. 

The Clean Energy Buyer Institute’s (CEBI)’s Renewable Energy Policy Pathways and Designing the 21st Century Electricity System reports were included in the CAISO report’s literature review and support the cost-saving benefits of well-designed and well-implemented organized wholesale markets. The final CAISO report also found that while several market design issues need attention, additional benefits such as greater transparency, increased stakeholder participation, and more efficient transmission utilization can be achieved through expanded regional coordination. 

As stakeholders weighed in on early drafts of the report, the Committee on Regional Electric Power Cooperation (CREPC) in its comments to CAISO also emphasized the benefits of an expanded multistate RTO and noted, “Western states are willing and able now to work collaboratively with California on governance and market expansion.” CAISO’s report acknowledges that enhanced cooperation depends on mutual benefits for all participating Western states.

With the momentum this report provides for greater regional coordination, California legislator Chris Holden recently introduced Assembly Bill 538, which will allow the California Legislature to advance the dialogue on regional grid collaboration by creating a pathway for CAISO to expand into a larger, independent RTO. 

CEBA supports an RTO for the West that would maximize benefits. More advanced markets would surpass the benefits of day-ahead markets and help maximize cost savings and grid benefits while providing more options to ensure reliability.