California grid operator focused on reliability, adding clean energy, Western market expansion

The California Independent System Operator has experienced record-high peakload, repeated heat waves, years-long drought, rotating outages, and significant renewable generation and battery storage additions, all in the last few years.

In addition to these challenges, CAISO is working to expand power markets across the Western Interconnection and is facing competition to do so.

"Preserving reliability is always issue number one for us - maintaining a reliable system," CAISO President and CEO Elliot Mainzer said in an interview with S&P Global Commodity Insights. "I think second, unequivocally, is making sure we have efficient transmission planning and interconnection queueing processes so we can onboard the second generation of clean energy resources. And third is continuing to make process across the West in evolving our energy imbalance market into a highly functional and valuable day-ahead market that will further improve reliability at lower costs for electricity ratepayers."

Energy transition

CAISO is working with state agencies and other regulatory authorities to bring the next generation of clean capacity online, while facing reliability issues related to the energy transition, as well as climate impacts from drought and wildfires.

"Resource adequacy is a central focus in California," Mainzer said.

CAISO is focused on supporting the state by making sure its transmission planning and interconnection queuing processes are as efficient as possible, Mainzer said, adding that in 2021 a record amount of new capacity was brought onto the California grid.

"We're going to have to basically replicate that for multiple years going forward just to onboard new capabilities," Mainzer said, adding that refining market design and bringing on large amount of new technology is essential.

CAISO is very focused on battery storage right now, Mainer said. There is over 4,400 MW battery storage on the CAISO system now, the largest in the world.

"We're expecting more of that, so interconnecting those resources and making sure that the price signals from our market incent those batteries to provide the most essential reliability services, that's a big part of our focus," Mainzer said.

Load growth

While CAISO doesn't build or maintain transmission lines, it does the planning for a reliable and affordable generation fleet and transmission grid across the state. The planning process is more challenging with each passing year given the significant market and climate changes taking place. It's not only rising temperatures though.

"The heat, the load volatility, the demand for electricity, the big push to vehicle electrification, the big push to move natural gas heating onto the power grid," Mainzer said. "In general, the migration of lots of energy uses onto the grid is growing loads ... so loads are growing rapidly and those forecasts are woven into the resource portfolios that are being developed by the California Public Utilities Commission and the public power utilities."

CAISO's job is to try to make sure it has the transmission capacity built and operating to onboard those resources, Mainzer said.

"We want to have a much deeper stack of load flexibility resources that will be available to us prior to grid emergencies to help prevent them," Mainzer said.

Westward expansion

During the September heatwave, the Western Energy Imbalance Market was very effectively cycling power across the West, Mainzer said, adding the EIM really proved its value during the heatwave.

"There were times when California was under very significant stress, but the heatwave hit other parts of the West as well and they were able to draw from the real-time energy market to supplement their supply," Mainzer said. "It really demonstrated that diversity and the benefits of cycling power around the West. The EIM really proved its value during the heatwave."

It was very evident to those watching the market that an extended day-ahead market would have been even more valuable during that heat wave by providing even greater transparency and visibility into that broad footprint across the West, Mainzer said.

"We would have known on a day-ahead basis, with much better accuracy, how much additional market supply was going to be available to move across the different utilities," Mainzer said. "I think it would have increased confidence that the footprint as a whole was going to be reliable and therefore would have reduced the need to declare (emergency) alerts on a day-ahead basis, which would have calmed down electricity prices."

EDAM progress

On Dec. 7, CAISO issued the final proposal for its extended day-ahead market, which builds upon the successes of the WEIM and lays the groundwork for a move to a full western regional transmission organization in the years to come.

"We're excited to brief our Board of Governors and the WEIM Governing Body in December and then bring them back for a final decision making in February," Mainzer said. "So, a lot of pieces moving, but with the fundamental goal of continuing to strengthen resource adequacy to onboard new resources and to make sure our market, both inside California and across the broader West, supports reliability and affordability."

The proposal will be presented to the CAISO and WEIM boards a joint meeting Dec. 14 and then will up for a decision at a Feb. 1 joint meeting.

"I think we also have folks inside California recognizing that as the market has evolved, the governance has had to evolve," Mainzer said. "And if we are to continue growing together and integrated together across the West, even going further than EDAM in the years ahead, that the governance will have to even further evolve. ... We certainly acknowledge and even embrace the fact that there are other market alternatives out there. I think that competition can be healthy. It's part of the mix. But we really deeply believe that the West does best when we optimize transmission and resource diversity across that broader footprint."