Physics and the Circle of Life

The last blog I posted was from my father’s house as he seemed to be in terminal decline. “Shuffled off this mortal coil…” he said, quoting Hamlet. But then, almost in time for spring to make itself evident, Dad stabilized. The respite, however long it is for a 94-year-old, is certainly welcome. With the increasing availability of the Covid vaccine, the good news seems to continue as life slowly returns to something approaching normal and a sense of optimism is being restored.

The circle of life has its own rhythm, however. This was evident when my sister-in-law, who has been battling ovarian cancer for a year and a half, took a turn for the worse. Life is sometimes that way – flowing unexpectedly in directions both for the good and for the less welcome.

Capacity Markets? We don’t need no stinking Capacity Markets!

I was present on the “meeting” that CREPC – the Committee on Regional Electric Power Cooperation – had last week with FERC Chairman Glick. I asked a question about his views on the need for an RTO across most of the West. The Chairman gave the expected answer that yes, it probably would be beneficial for the West to have a much bigger RTO. He then made the understandable caveat that the West is different than the East, where capacity markets are active. If a Western RTO were established, how the region chose to deal with Resource Adequacy (RA) would be up to them.

I sent a message to a former colleague on FERC staff to generally approve of the Chairman’s response but the reply I got was surprising to me. My former colleague supposed that I would be in favor of a capacity market. Would I be satisfied to have an RTO without a capacity market? I explained that I have developed a deep appreciation for the bilateral approach to dealing with RA. As we contemplate a future with a Western RTO, I can see an RA construct with agreed upon rules for procurement and penalties for non-compliance that works for the states, economic efficiency, and reliability. Bottom line, there is no absolute need for a centralized capacity market. The West does need a regional RA construct, but most urgently it needs a network dispatch to make the best use of that RA capacity in the region.

A preview of coming attractions…

A proposal by the CAISO on how to allocate transmission between power that is “wheeling through” the CAISO’s network from one region (say the Pacific NW) to another (let’s say, the Desert SW) got the blood flowing last week. It seems the current rules would have given preferential treatment to “wheel throughs” over service to native load if transmission were to become scarce. This situation was seldom a problem when capacity was plentiful in WECC. Retirements of legacy units outside of California, coinciding with load growth in the Pacific NW, have had the effect of putting a spotlight on the awkwardness of moving power around the West to meet the regional needs.

Most of the West uses a static “contract path” method for allocating electric transmission as if it were a gas pipeline – a transactional fiction that ignores the physics of the system. However, CAISO’s dynamic dispatch optimally schedules flows on its network. That is the benefit of a security constrained economic dispatch (SCED). The CAISO’s SCED uses bids – lowest to highest – to schedule power on a least cost basis. At each node in the system, the least cost set of units that can serve load are dispatched. This network approach results in the feasible and economically efficient use of the transmission system.

The “contract path” approach necessitates that schedules cannot take full advantage of transmission capability as the “path” must be limited to ensure the flows in other areas in real physical terms do not overwhelm the surrounding system. The “contract path” cannot possibly load a regional transmission system to its full capacity. Using this fictitious path allocation there is no entity that can optimize the transmission system in the way a network dispatch does.

I apologize for going over this distinction, but it helps to highlight why the CAISO’s emergency “fix” to dealing with these conflicting systems was, while necessary, probably troubling to anyone outside of California. Consequently, it is an appropriate issue to be brought to the Feds… why else have a Federal regulator?

Fortunately, the Governing Board of the CAISO’s Energy Imbalance Market (EIM) had a healthy debate about the merits of the CAISO proposal. At first, it seemed as if the EIM Board would reject the proposal – kind of like a kid telling the parents “no, I don’t want you using my car”. But in the end, the EIM Board voted – with one exception – to take “no action” on the proposal. It was clear to everyone participating, however, that this was going to be a contested filing at FERC.

This is a fine procedural fix we’ve gotten ourselves into…

Lest we forget, FERC is planning on having at Technical Conference on Resource Adequacy in the West in June. While the details are not yet available, I am hopeful the agenda will include a discussion of the need for California’s RA construct to acknowledge the Northwest Power Pool’s efforts to formulate RA for much of the remaining West. That dialogue might have led naturally to a discussion of the need to more efficiently allocate transmission across a broader network. However, the timing of a contested case before FERC (see above) will likely make this latter discussion impossible.

Nevertheless, a serious discussion of the need for the West to have a viable network dispatch – either as part of or in coordination with CAISO – is long overdue. Speaking personally, I am hopeful that FERC will find a procedural solution to enable the CAISO proposal to go forward in the short-run but set a date for a regional meeting to come up with a long-run solution after we get through the summer peak season. FERC would not try to force the formation of an RTO – they know such an effort would be counter-productive. That said, they can use the threat of another summer using the limitations on “wheel throughs” as a mechanism to get the region to come to grips with its immediate needs. As a political consultant once told me, “never let a crisis go to waste.”

Back to the circle…

I was tempted to conclude this submission by analogizing how transmission, like life, does not follow a direct path. But life is often too serious to give such flippant treatment. We have all been through a great deal in the last year. But things are getting better and soon we can all begin to meet, greet each other, and talk things through. My hope is that our hard-won appreciation for the need for interaction will make solutions to challenges like those that confront us in the West possible. As I finish this, cocktail time is approaching. I will raise a glass to that thought. Cheers.