California air agency reviews imbalance market

OREANDA-NEWS. The agency implementing California's cap-and-trade program has asked the California Independent System Operator to provide detailed data on power imports into the state's primary grid within the recently established energy imbalance market.

California laws require electricity dispatched into the state grid to reflect the cost of greenhouse gas emissions. The energy imbalance market is a secondary power trading structure, allowing participants across the west to trade their ability to adjust generation up and down to meet unanticipated changes in market balance. External entities participating in the imbalance market can ask not to be dispatched into California to avoid the greenhouse gas costs. But the current method for doing so is imperfect and the grid operator plans to change it by 1 October.

The California Air Resources Board issued the subpoena on 1 April, setting a deadline of 1 May for submitting detailed information on imbalance market entities importing power into California's primary grid, the volume of energy scheduled for flow and the actually dispatched amount. The initial submission will cover the operations of the imbalance market in November-December 2014.

The air board also requested the California grid operator to file annual reports with similar information through 2024, by 1 April of every subsequent year.

The air board is satisfied with existing information on electricity exports from California within the imbalance market, which does not identify specific generators that are the source of exports.

But the agency was not content with available data on the energy imbalance transfers into California, which by definition only represented net energy exchanges. The air board instead wants information on the real-time energy dispatch, indicating volumes imported into the California primary grid.

Almost all capacity participating on the PacifiCorp side of the energy imbalance market consists of gas and coal-fired resources. The California grid operator, which administers the imbalance market, has to include cap-and-trade compliance costs into dispatch decisions. But imbalance market participants at present can include a greenhouse gas bid adder set as high as \$1,000/MWh to avoid dispatch, in lieu of a more direct method of avoiding dispatch.

The Federal Energy Regulatory Commission and many market participants are unhappy about the method. The California grid governors last month approved a different method of dispatch that they hope will be approved by federal regulators in time for NV Energy to join the energy imbalance trading in October.

External imbalance market participants will be allowed to submit a megawatt quantity and price bid associated with each transfer. A participant will avoid dispatch into California by selecting zero as the megawatt quantity in the bid. Bids by entities willing to be dispatched into California will be evaluated against a daily maximum greenhouse gas bid cost determined by the grid operator, which will reflect the resource's maximum heat rate and emission rate.