Coal unaffected by APS imbalance market membership

OREANDA-NEWS. An analysis from Arizona Public Service (APS) shows little effect on the utility's coal fleet of pending participation in the California-led energy imbalance market.

APS is the latest western vertically integrated utility aiming to join the imbalance market managed by the California Independent System Operator. The imbalance market supplements existing day-ahead and hour-ahead energy trading, allowing energy trading in five and 15 minute intervals to balance short-term changes in load or renewable generation output.

External analysis by consultancy Energy and Environmental Economics projects annual savings for APS joining the market will be \\$7mn to \\$18mn. The estimated benefits are not sensitive to the potential retirement of coal capacity in the west, including in the APS territory. Three scenarios involving various levels of coal capacity retirements and a carbon price do not show much variation in benefits to APS.

The utility last year derived about 38pc of its power from coal, 30pc from nuclear, 22pc from gas and 10pc from renewables. APS owns 1,900MW of coal generation distributed in ownership stakes at the Four Corners power plant in New Mexico and the Cholla and Navajo plants in Arizona. The Arizona Corporation Commission last week gave its approval for APS to retire the 260MW Cholla unit 2 in April 2016.

Some coal plants in the PacifiCorp territory, which joined the imbalance market last November, cannot participate fully in imbalance trading for operational reasons. Large western coal plants typically have multiple owners but no process exists in imbalance trading for an owner of a unit to offer that capacity into the imbalance market independently of the other owners. Deseret Power in Utah has asked the California market operator to enable such capacity. Coal plants in APS' territory also have multiple owners.

PacifiCorp after the first few months of participating in the imbalance market decided to explore full membership in the California Independent System Operator power grid. Such membership will allow California to export its systemic daytime solar over-generation to neighboring grids.

Some analysts see rising California solar capacity — so abundant that real-time prices drop below zero at times — competing with gas and coal generation in the west, if the California grid expands.

But coal plants in the west, with access to Powder River basin supplies, still retain competitive edge with natural gas on price and have the operational advantage in being able to run as baseload units.

The western imbalance market following APS' accession in October 2016 will cover eight states. Arizona-based Tucson Electric Power is considering participating as well.