When the Western Energy Imbalance Market (WEIM) was launched by the California Independent System Operator (ISO) and PacifiCorp in 2014, not everyone was upbeat about its prospects. In a region long known for strong adherence to local control and self-determination, it was an open question whether disparate energy providers across the West could find common ground, work together, and meet their various challenges and obligations collaboratively. Today, I am happy to note, a much more optimistic and positive spirit has taken hold. By any measure, the WEIM has been a big success. It continues to grow and bring significant economic and environmental benefits to California and all its participants across the broader West.
The WEIM will soon have 19 entities in 10 states that collectively serve more than three-fourths of the demand for electricity in the Western United States. Cumulative financial benefits to market participants recently topped $2 billion, a doubling in cost savings in less than two years. Environmental benefits have also been noteworthy, with nearly 700,000 metric tons of greenhouse gas emissions avoided as greater coordination enabled by the market helps participants efficiently shift clean power to where and when it’s needed most. Given that track record, it is no surprise that we now see greater interest in broader market integration across the region. Several Western states, in fact, have passed legislation requiring their public utilities to join a regional transmission organization. The benefits of greater coordination on energy issues across geographical boundaries is no longer a matter of debate.
The Power of Collaboration in Achieving Financial and Environmental Objectives
Collaborative regional markets like WEIM have demonstrated the strong financial and environmental value that can be realized by broadly linking our energy systems together. With resource adequacy challenges growing more acute and visible in the West due to climate change and other factors, there is now a compelling imperative for working collaboratively, sharing resources, getting bulk and distributed renewables onto the grid, and optimizing transmission assets as efficiently as possible.
Studies have demonstrated that in the West, we create the greatest amount of value and save ratepayers the most money when we optimize transmission and resource diversity across the widest geographical footprint possible. We have also seen a growing appreciation of the fact that we will be better able to achieve our energy policy objectives and do it reliably if we spread potential volatility and resource diversity across a broader region. Put another way, Western energy providers and the public both benefit when we work together on common challenges and come up with equitable and fair solutions that take everyone’s needs and concerns into account.
As can be seen in the figure, a key driver of the value created by the WEIM is the large amount of transmission capacity linking the various regions of the West. The WEIM leverages this physical infrastructure by optimizing economic transfers between the different WEIM entities. This transmission infrastructure has driven the more than $2 billion in economic benefits generated by the market. And that is why the California ISO has been working with utilities, stakeholders, current WEIM participants, and others to bring even greater benefits through an Extended Day-Ahead Market (EDAM) where the vast majority of energy transactions occur. We believe this is the next logical step in Western market integration.
Figure: Transmission, the Great Enabler
The figure shows WEIM transfer paths in year 2022. The “bubbles” are 20 participating Balancing Authorities (BA’s), and the connecting lines are inter-BA EIM transfer paths via different transmission tie-points.
Broad Participation in Designing a Market Framework
In late 2021, after a series of well-attended stakeholder meetings and consultations with WEIM participants, three working groups were established to begin designing a day-ahead market framework that can meet the needs of the diverse array of participants we believe this expanded approach would attract.
The three groups spent 11 weeks engaged in vigorous, open, and transparent debate about such crucial issues as resource sufficiency and how that is verified, transmission commitment and compensation, greenhouse gas accounting, and more. Everyone had a chance to voice concerns and suggest different possible approaches. Emerging areas of consensus were identified, as were issues requiring additional discussion and analysis.
Everyone understands the importance of decisions regarding how such a market would be governed, and a WEIM Governance Review Committee is evaluating the next set of governance reforms needed as the market continues to evolve.
Before the end of April, informed by those written reports and the 11 weeks of working with stakeholders, the California ISO will publish its straw proposal on how the market should be structured and organized and how it would function. Interested parties have until early June to provide comments.
We are on track to have major market design elements in place by the end of this year and plan to spend 2023 working on implementation and testing within the ISO and with the market participants. Onboarding for an initial class of participants in the Extended Day-Ahead Market would begin in early 2024.
There is a great deal of additional work to be done. But there is also tremendous momentum and support for making this type of broad market integration work so we can all better serve the public, meet our energy policy objectives, and save money while enhancing reliability throughout the region.
President and CEO
California Independent System Operator