by Alan Bull – General Manager, Compliance Services, NAES Corporation
The California Independent System Operator’s (CAISO’s) announcement on January 2 that it plans to withdraw from Peak Reliability (Peak), effective September 2019, in order to become its own Reliability Coordinator (RC) has set changes in motion throughout the Western Interconnection. In addition to CAISO’s announcement, Peak and PJM Connext, a wholly owned, non-regulated subsidiary of the PJM Interconnection, have unveiled their plan to create a new market in the West.
Peak has asked potential customers to give them more time to flesh out the details of their proposal before seeking RC services elsewhere. “We know there is a lot of fear, uncertainty and doubt out there, in that people believe they have to make a decision in the next few weeks about our RC services,” Pete Hoelscher, Peak’s chief strategy officer, said on a February 6 conference call. “Our point of view is clearly that is not the case.”
So far, the Peak-PJM Connext plan is already winning praise, both because of the sponsors’ experience with providing reliability and market services and because of the current obstacles to expanding the CAISO as a RC. “What Peak and PJM have proposed is very appealing,” Scott Miller, the incoming executive director of the Western Power Trading Forum, said Wednesday. “Peak certainly has the reliability function down pat, as well as experience modeling the entire Western Interconnect. PJM probably has the most experience in running a large, locationally-based market and a centralized dispatch.”
CAISO stated that it could offer the RC services at 50 to 75 percent less than Peak’s rates, urging balancing authorities to sign letters of intent by March 1 if they were interested in using CAISO’s services. Observers say that CAISO’s January 2 announcement started the clock ticking for entities to make a major decision without complete information – i.e., whether to align with markets run by existing grid operators in the Western region, including CAISO, or to hold out for the potential new market design floated last year by Peak and PJM Connext.
Since January, however, Peak and PJM Connext have revealed new details about their proposed market, as well as an ambitious timeline that would have portions of the market up and running by 2020. They stated in the February 6 call that the initial market offering would include the following:
- A nodal, locational marginal pricing-based market;
- Real-time and day-ahead energy markets;
- Financial transmission rights; and
- Consolidated credit and market settlement.
Additional services, based on stakeholder interest, could include regulation and reserves, a demand response construct and a capacity construct and market. According to Todd Bessemer, PJM managing director for strategic development, entities would be able to choose from a menu of services, including Peak’s existing RC services, balancing authority services and market services.
“We realize that not everyone is going to be ready for markets at the same time, so our offering is not exclusive,” Bessemer said. “For those who wish to remain in other arrangements such as CAISO’s [energy imbalance market], Peak will continue to provide reliability coordinator services for those who wish to use them.” Meanwhile, rumors circulate that both the Mountain West Transmission Group, a collaboration of electricity service providers in that region, and BC Hydro will leave Peak in order to obtain RC services elsewhere.
The successes and failures of prior Western regional energy initiatives would suggest that the path forward for these competing RC and market initiatives may take some significant twists and turns before a clear outcome emerges. While these moves may have no immediate impact on generation facilities, the way in which generation units are dispatched may change substantially if a PJM-style market becomes active in the West. In addition, the RC entity that facilities in the West need to interact with – both for compliance purposes and to support reliable operations – may change. We encourage Western organizations to continue monitoring these significant developments as they evolve.Download File