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Warren Buffetts PacifiCorp

Commits to Energy-Sharing
Market
A regional
Energy
Imbalance
Market could
smooth
renewable
integration.
Herman K. Trabish
February 13, 2013

PacifiCorp and the California Independent System Operator

Corporation (the ISO) will work together to lead the entire
western U.S. toward a new energy-sharing market that will
smooth the way for more reliability in power delivery and more
renewables.
PacifiCorp (PINK:PPWRP), which controls two balancing
authorities covering portions of six western states, and the ISO,
the regional powerhouse, signed a memorandum of
understanding (MOU) to work toward creating an energy
imbalance market by October 2014, according to MidAmerican
Energy Holding Company VP Jonathan Weisgall.

PacifiCorp is a subsidiary of MidAmerican Energy. MidAmerican

is one of the dominant U.S. utilities in the ownership of
renewables, and is itself a subsidiary of Warren Buffetts
Berkshire Hathaway (NYSE:BRK.A).
Californias ISO operates the only advanced energy market in
the Western Interconnect region. Like much of the Northeast,
Midwest and Canada, the ISOs real-time, IT-optimized market
automatically balances electricity deviations every five minutes
by choosing the least-cost resources available.
The 39+ other electricity delivery systems in the West, including
PacifiCorp, manage deviations with manual dispatches and a
system of reserves.
This MOU signals a crucial shift by PacifiCorp toward the ISOs
method that could lead the way to a regional Energy Imbalance
Market (EIM). A Public Utility Commission Energy Imbalance
Market (PUCEIM) group composed of researchers from the
National Renewable Energy Lab, the Western Governors
Association, and multiple independent agencies is working on
such a plan.
This is good news for customers, renewables, integration of
renewables, reliability and oversupply challenges, Weisgall said.

Those who dont understand how renewables are integrated

into Californias system argue that their variability threatens
reliability.
If you have wider geographic areas sharing different plants, you
can smooth some of that variability, Interwest Energy Alliance
Southwest Representative Amanda Ormond recently told GTM.
An energy imbalance market allows dispatch of the lowestcost resource to address energy imbalance when a load turns
on unexpectedly.
The Wests many balancing areas are presently relatively
inflexible, Ormond said, because they have only their own
reserves to call on for imbalance. They therefore keep large
amounts of energy in reserve to meet potential contingencies.
And the last generators you turn on are typically the most
expensive.
Without an EIM solution, Ormond said, more renewables will
increase variability and the inefficiencies will become more
costly. With an EIM, there is more flexibility.

Modernized grid dispatching across interconnected systems

using automated tools can more accurately balance a wider
array of resources , according to PacifiCorp. By capturing that
wider portfolio of resources, an EIM ensures electricity shows
up where and when it is needed, cutting costs and enhancing
reliability.
Each new EIM participant will have a start-up cost related to the
size of its participation. PacifiCorp estimates it will pay $2
million, its press release said, though existing ISO players will
pay nothing. Subsequent use of the EIM will be on a pay-asyou-go basis. The ISO and PacifiCorp are working to define
additional costs and benefits.

To preserve current balancing authorities autonomy, Ormond

stressed, the western interconnect EIM would be a voluntary
market. In an EIM, if I am a utility and I have a couple of
generators that arent running, I could offer them to the system.
When someone needs energy, they are going to ask for energy.
I can either allow that to be scheduled or not.

An objection voiced by the American Public Power Association

(APPA), a utilities advocate which opposes a Western
Interconnect EIM, is that an absence of critical details about
governance, market monitoring and supervision, and cost raise
the concern that an EIM could quickly evolve into a Regional
Transmission Organization (RTO).
In response to this concern, Ormond clarified that it is a market
for balancing energy, not an RTO. Legal opinions suggest an
EIM can have a hard wall to prevent it leading to an RTO. It is a
centralized unit for dispatch of balancing energy. It is not for
capacity. If you offer a unit, it can be scheduled within the
parameters you allow.
Most importantly, she repeated, it is voluntary. If I want to go
into this market, I can. But if I get into this market and find out it
is not cost-effective for me, I can step back out.
The APPA contends infrastructure and operating costs could, in
some scenarios, outweigh the estimated benefits, with the net
costs potentially reaching $1.25 billion in net present value
terms over the first ten years.
The PUCEIM group, Ormond said, has preliminary cost
estimates from the Southwest Power Pool (SPP) and Californias
ISO suggesting an estimated $3.50 per megawatt-hour cost but
further cost-benefit analyses, along with potential market
design studies, are under way.
Well be working in the coming weeks with the CAISO to
finalize the terms of a more specific agreement, Weisgall said.
We also continue to support ongoing regional discussions that
will eventually lead to much broader, region-wide coordination,
and were hopeful this initial step will help facilitate these
broader efforts.

TAGS: american public power association, balancing authorities,

balancing reserves, berkshire hathaway, california independent system
operator, energy imbalance markets, energy market, interwest energy
alliance southwest, iso, midamerican energy, national renewable nergy
lab, pacificorp, public utility commission energy imbalance market,
puceim, regional transmission organization