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The creation of a 11-state regional grid, managed by California's Independent System Operator, would be a big boon for the environment and for California's economy, according to the latest studies. But Utah could see increased carbon emissions in the early years of such a grid — and would have to agree to a uniform fee to access it.
California ratepayers stand to save as much as $1.5 billion a year under the regional grid proposal — enough to cut the state's retail power rates by as much as 3 percent, while at the same time meeting or exceeding its goal of obtaining 50 percent of its energy from renewable resources, said Keith Casey, vice president of market and infrastructure development for the California ISO.
But that outcome hinges on participation from all 11 western states — California, Utah, Washington, Idaho, Montana, Oregon, Wyoming, Nevada, Colorado, Arizona and New Mexico — and assumes those states develop additional renewable resources on their own. It also assumes the states and their utilities agree to a uniform fee for transmission access.
California hopes to convince its western neighbors that the ISO — a nonprofit organization that, by state statute, oversees power distribution in California — ought to oversee regional power distribution. In the event that they fail, Casey said, California could end up with a surplus of 13,000 megawatts of renewable energy by 2025 that would have to be shut down when peak generation exceeds demand.
"I don't think it makes societal or economic sense to turn off zero carbon, zero marginal cost power so frequently," Casey said. "The opportunity to sell that power out of state without the friction allows renewables to flourish in California and out."
Participating states would not be asked to develop more renewable resources and would maintain their authority over energy policy, Casey said. A higher level of cooperation between states would encourage the development of more renewable resources outside of California, he said, by increasing demand for those resources and, potentially, making them cheaper to access.
Currently, Casey said, there are 38 separate grid operators across the western U.S., and all of those operators charge each other tolls when one entity wants to move power across transmission lines owned by another. When, for example, California wants to access wind power generated in Wyoming, it is necessary to cross the territory of several grid operators, accruing fees all along the way. These charges build on one another, making energy increasingly more expensive the farther away it's generated.
The regional grid could level the playing field by removing this barrier, Casey said. Though California has yet to work out how transmission tolls would be governed, he said the ISO's study assumed an agreement where participating utilities would pay a single, uniform fee to move power within the region, and would share the cost of maintaining and constructing transmission lines.
Such an arrangement would make it just as cheap if not cheaper to buy wind power from Wyoming, or hydropower from the Pacific Northwest, as it is to fire up a natural gas plant in California, Casey said. This would incentivize private industry to build more renewable energy throughout the west and exert downward market pressure on existing fossil fuel resources.
Casey said this scenario would lead to a 3 or 3.5 percent reduction in carbon emissions across the western U.S. by the year 2030. But there would be, he said, a .2 percent increase in carbon emissions in the grid's early years if PacifiCorp were the first utility to enter into the agreement. PacifiCorp's coal-fired power plants would need to dispatch more power until those plants are retired or displaced by cleaner sources of energy as more utilities enter into the agreement.
PacifiCorp, which operates as Rocky Mountain Power in Utah, is actively exploring whether its participation in the regional grid would be advantageous. A study commissioned by the utility suggests a regional grid could save its customers up to $272 million by 2030.
Casey said transmission costs are a big issue that the ISO will have to sort out as new utilities enter into the regional agreement. As of now, he said, the policy regarding these costs is considered a work in progress.
Exactly how that issue is worked out could have costly implications for Utahns. Kelly Francone, executive director of the Utah Association of Energy Users, has said her organization believes a regional grid could result in overall costs reductions under the right circumstances. But the cost of using transmission lines in California are much higher than the costs of using transmission lines in Utah, she said. So depending on how the details work out, the transmission access tolls and any administrative fees added by the CAISO could negate Utah's portion of grid-wide savings and may actually cause local power rates to increase.
Utah lawmakers have also been skeptical of California's proposal, with Gov. Gary Herbert and others citing fears that Utah's ability to make regulatory decisions regarding energy development and pricing would be curtailed if it became part of a regional grid. An initial document outlining the guiding principals by which the regionalized ISO would be governed called for the protection of states' regulatory autonomy, but the governor's energy advisor, Laura Nelson, said that proposal was not satisfactory.
The Governor's Office of Energy Development, the Utah Association of Energy Users, Rocky Mountain Power, and other organizations are set to discuss grid regionalization during a meeting of the Public Utilities, Energy and Technology Interim Committee on Wednesday at 12:50 p.m.
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Grid discussion
The Governor's Office of Energy Development, the Utah Association of Energy Users, Rocky Mountain Power and other organizations are set to discuss grid regionalization during a meeting of the Public Utilities, Energy and Technology Interim Committee on Wednesday at 12:50 p.m. in Room 450 of the Utah Capitol.