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Remain Calm! All is Well!

Have you ever had a stupid song on repeat in your head, wondering what your brain is trying to do to you? I had that happen last Friday morning at the Seattle airport. That cheesy Perry Como song from the 1960s - “Seattle” - was resourcing in my head… “Like a beautiful child growing up, free and wild…” I thought I was going to go insane! Then I realized, it was probably my brain trying to distract me.

As I landed in Seattle two days before, I learned that my Mom had passed away. I was preparing to host a WPTF Roundtable on Pacific Northwest (PacNW) issues the next day with about 70 people. There was nothing to do but focus on the meeting. Nevertheless, I was quite grateful for the distraction. Losing a parent is something that we all must face. My Mom had been in pain for a while. The siblings would assemble in our hometown of Louisville and help Dad sort out the details on Friday. The day after finding out about Mom could have been a lot worse. Compartmentalization kicked in and the meeting went well, I thought. Thank God for work.

Three futures…

If you have been paying attention to developments in the PacNW, you know that real concern has risen over the following developments:

  •          The various state mandates to integrate renewables at a fast pace, while retiring legacy generation;
  •          Transmission infrastructure that requires upgrades to better move power to load; and
  •          The vital need to compensate the Resource Adequacy (RA) resources that help balance the system as we weather the transition to the low carbon future.

Our aim with the WPTF Roundtable was to provide a forum for the exchange of ideas. Since the PacNW is new to acting as a region and is facing such unprecedented change, however, we felt it was necessary to provide a foundation for that discussion. Brian Tulloh gave a terrific overview of how the Mid-Continent region uses its network market to inform where to upgrade transmission and how to manage resource adequacy. It was a broad explanation of how an RTO leverages all three activities for a more efficient outcome, and it highlighted a slightly different way of doing things than the CAISO.

Next up was a hopeful report from Shaun Foster of Portland General Electric on the merger of Northern Tier Transmission Group and Columbia Grid into NorthernGrid. The intent of the organization is to move the region toward meeting FERC Order 1000 Transmission Planning standards. The discussion quickly moved from the incremental improvement for transmission planning to the fact that well-intentioned planning is unlikely to yield much building without agreement on cost allocation and experience dispatching a regional system.

Finally, Carl Monroe from SPP gave a very useful account of how his organization grew – like ColumbiaGrid – out of a World War II requirement to pool power.  SPP evolved incrementally from the primary task of managing reliability.  From that core function, it went on to become an entity with a regional tariff managing some network assets, then to establishing an imbalance market, and ultimately to becoming a full RTO. This discussion was helpful in pointing to how the incremental steps toward a market, the incremental steps toward transmission planning, and the incremental efforts to procure regional RA might naturally coexist – potentially even coordinated under one roof.

Throughout the meeting, Phil Pettingill from the CAISO provided input regarding how the Energy Imbalance Market (EIM) effort could be a bridge to achieving regional activities… eventually. This served as an instructive reminder that disparate work streams might never lead to the kind of regional integration that we need. I think the group appreciated the degree of hope he offered. However, one must wonder if bringing together the benefits of an RTO without a solution to the CAISO’s governance is much like the promise of fuel cells… full of potential but always out of reach.

A Confederacy Before Regionalization?

Roundtable participants expressed significant concern that an incremental approach to the region’s challenges would not meet our needs without merging them into a single effort like an RTO. The incremental experience of SPP, however, provides some important insights. Throughout the evolution of SPP, the states in its footprint kept turning to the same institution every time they needed something done on inter-state power policy. If we only had such a one stop shop in the PacNW.

Despite skepticism of the incremental approach, the idea of a “regional tariff” garnered some interest among roundtable attendees. Each EIM entity currently has a unique Open Access Transmission Tariff (OATT) as its governing platform.  This disparate structure bedevils the EIM and will likely be thorny for the Extended Day-Ahead Market (EDAM) as well. Different OATTs leads to endless interpretation of how best to handle transmission for third party transmission customers across the entire footprint. This often leads to conflicts, regulatory fights and ill will for those outside the EIM “incumbents’ tent”.

Why not try a unified tariff for all EIM transmission uses? This would mean that third party access to transmission in EIM entities would have to deal with one uniform tariff when it comes to selling into the EIM. Each utility would continue to use the original OATT for all other uses of the transmission system. While this is still complex and a long way from single regional security constrained economic dispatch, it could eliminate many problems. Something to ponder.

Defining the Product

One other discussion point that got significant attention was how to structure regional RA. An accepted starting assumption is that RA in the future will not just be procuring assets and counting them uniformly. As zero-marginal cost assets start to dominate the supply stack, we must agree upon the attributes needed to balance the system. Furthermore, stakeholders must determine how best to compensate resource-holders for those attributes. Presumably, thermal resources will provide flexible attributes. Compensation structure is key, since these thermal assets increasingly cannot compete in the energy market.

Thus, defining the future product is elemental. This resonated with me because selling a product is defining what everyone needs. That helps establish the “property” for which our legal system and markets can define “rights” for and how to pay for them. But first, what precisely are the required attributes?

Once we define them, we can decide if procurement through a revamp of the ancillary services products is possible, or if it is something that looks like a revised RA procurement market. I sense the outlines of the next WPTF Roundtable. Maybe in Houston where some of the best minds in the energy space make their bones… we shall see.

Can’t we just…

Face facts: The expedient way to address the region’s challenges is with an established RTO. The CAISO is unlikely to get legislative permission to change its governance. Without such a change, out of state utilities are highly unlikely to turn over control to the ISO. The EIM entities have done great work demonstrating how they can interact in a market. Ideally, the next step would be to join the efficient and reliable CAISO market framework – but why wait? Would it not be efficient to put out an RFP for a market administrator now and link it to the CAISO market? Would it not be prudent to get some operational experience to inform a transmission planning process? PacNW entities could take the opportunity to gain experience from the dispatch to inform a regional RA process that does not have the baggage of the California “fruit and nut” politics.

I know. I hear the voice of EIM participants chanting, “incremental”. I can hear them say they have too many battle scars from past efforts. But even relative to this baggage, shouldn’t the need to act boldly to tackle the challenges of renewable integration, reliability, and transmission weigh more heavily?

Perhaps the sheer complexity of our industry undermines our ability to bring a political focal point on a regional need. It is complex. Maybe that is why my mother never really understood what I did for a living. I’m glad she didn’t waste time trying to figure it out, even though it probably made it harder to brag to her friends about her son.