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EDAM progress “is very encouraging”
January 5, 2023
The California Independent System Operator’s (ISO) proposal for an extended day-ahead market (EDAM) in the West gained considerable momentum as 2022 drew to a close, with publication of a final market design proposal, completion of a study showing its potential benefits and an announcement from the first utility planning to participate when the market goes live.
The final market design proposal, drafted after more than a year of focused stakeholder engagement with dozens of stakeholders throughout the West and nearly 80 stakeholder meetings, was published in early December followed by a public briefing on its contents to the Western Energy Imbalance Market (WEIM) Governing Body and the ISO Board of Governors.
PacifiCorp, one of the largest utilities in the nation operating in six western states, soon announced its intent to join EDAM. PacifiCorp was also the first utility to join the ISO’s Western Energy Imbalance Market (WEIM) when it launched in 2014. The ISO and stakeholders have designed the rules and protocols for EDAM to build on the success of the WEIM, a real-time market that has generated more than $3 billion in benefits for market participants over its lifetime.
“All the progress that has been made working with stakeholders on EDAM is very encouraging,” Elliot Mainzer, the ISO’s president and CEO, said. “The PacifiCorp announcement was a very important step in establishing a broad market footprint for EDAM and we are looking forward to a high level of interest from other entities that want to participate in what we believe will be a very dynamic and beneficial extended day-ahead market.”
By operating in the larger day-ahead environment, EDAM can optimize resource commitment across a broad regional footprint with greater resource diversity, giving it the potential to generate additional benefits and lower costs for electricity consumers.
In a December 8 announcement from PacifiCorp that it plans to be part of EDAM, Stefan Bird, president and CEO of the PacifiCorp division Pacific Power, was also enthusiastic about the new market’s prospects.
“This next step to a day-ahead market is another game-changer to increase the triple benefit to our customers of cost reductions, increased reliability and reduced emissions,” Bird said in a statement released to the media. “A modernized western energy market is a key component of PacifiCorp’s strategy to connect and optimize the West’s abundant and diverse energy resources to deliver the lowest cost and most reliable pathway to a net-zero energy future.”
The potential economic benefits were highlighted a few weeks earlier, on November 18, when the Committee on Regional Electric Power Cooperation (CREPC) hosted a webinar featuring a presentation on an ISO-sponsored analysis conducted by Energy Strategies LLC titled, “Estimating Savings for California and the West under EDAM Market Scenarios.”
Energy Strategies also performed a 2021 state-led market study that had been funded by the U.S. Department of Energy and led by state energy offices in Utah, Idaho, Colorado, and Montana. The company used consistent methodologies in both studies.
On top of benefits already realized through the WEIM, the latest Energy Strategies analysis concluded that:
- Total annual incremental operational savings for the West would be up to $543 million per year from reduced power production expenses;
- California’s total annual operational savings would be $214 million;
- A West-wide EDAM would reduce CO2 emissions an estimated 1.5% or 2.92 million metric tons a year, equal to removing more than 634,000 vehicles from the road;
- Potential capacity savings that could be achieved, represented by reduction in reserve requirements and resource buildout requirements, could reach up to $557 million per year depending upon the resource adequacy structures in the West, $95 million of which could accrue to California from these avoided investments.
- If the full suite of EDAM benefits is realized, the entire West could save up to nearly $1.2 billion annually, with California realizing $309 million of these annual savings.
Concurrently, the ISO has also been working with other California balancing authorities, stakeholders and the National Renewable Energy Laboratory, (NREL), to prepare a report requested by the California Legislature on the potential benefits of expanded regional cooperation for electricity.
Under the terms of Assembly Concurrent Resolution 188, which won unanimous approval last summer, the ISO was asked to provide the Legislature with a report by February 28, 2023 summarizing recent relevant studies on the impacts of expanded regional electric grid cooperation on California. The report will also identify “key issues that will most effectively advance the state’s energy and environmental goals, including any available studies that reflect the impact of regionalization on transmission costs and reliability for California ratepayers.”
The resolution’s sponsor, Assemblyman Chris Holden, D-Pasadena, has said the effort “will help pave the way” for creating a “regional system that expands the footprint for clean energy resources and enables better collaboration, transparency and integration across the western power grid system.”
The ISO’s EDAM initiative process was re-launched in the fall of 2021 as the next logical step in regional coordination. By leveraging the significant resource diversity and transmission connectivity between major supply and demand regions throughout the Western United States, it is designed to deliver additional benefits incremental to those currently derived in the WEIM through strong regional collaboration across a larger geographic footprint.
The market would be set up to efficiently position supply in the day-ahead timeframe to meet forecasted demand across the EDAM footprint. It would also identify economic transfers between participating areas, providing economic, reliability and environmental benefits for participating balancing areas and their utilities.
Operational benefits result from reduced production expenses and commitment and dispatch of least-cost resources to meet demand. EDAM will also enhance operational transparency and better coordinate responsiveness to realized supply and demand uncertainties that can occur between day-ahead planning and real-time operations. Since demand peaks vary for individual balancing areas across the year, the day-ahead market seeks to efficiently commit supply to meet peak needs of the footprint as a whole.
A diverse and broad supply pool provides the market with visibility into resource sufficiency across the footprint and allows the market to effectively position supply in the day ahead timeframe and respond to changes in conditions, reducing the frequency and magnitude of emergency conditions.
Such a market would also result in significant environmental benefits. When excess renewable production occurs in one balancing area in the regional day-ahead market, for example, the energy can be used to meet demand elsewhere, reducing the need for clean resource curtailment.
In parallel to the market design effort, a stakeholder committee considered changes to the current WEIM governance structure that supports EDAM. The Governance Review Committee worked through a public process including several iterations of a proposal, and the revised draft final proposal was posted on December 29, 2022. The ISO Board of Governors and WEIM Governing Body were briefed on both the governance proposal and the EDAM design during the final meeting of 2022 on December 14. They also heard an update on the progress that has been made on complementary initiatives and both governing entities will consider the EDAM proposal for approval at their joint meeting in February 2023.
Once approved, the market design components will support development of specific market rules, in coordination with stakeholders, for filing with the Federal Energy Regulatory Commission as amendments to the CAISO tariff and the open access transmission tariffs of interested entities.
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