July 12, 2016

Study Co-Authored by Brattle Economists Examines Impacts of a Regional Power Market in the Western U.S. for California ISO

Brattle economists have co-authored a new study that provides a comprehensive examination of the impacts of transforming the California Independent System Operator (CAISO) into a multistate, regional ISO. Among its key findings, the study estimates an annual savings for California ratepayers would grow from $55 million/year in 2020 (with only CAISO and Pacificorp participating) to a range of $1 billion to $1.5 billion/year by 2030 (for a large regional market).

The report was prepared in response to a legislative requirement outlined in California’s Senate Bill No. 350 – the Clean Energy and Pollution Reduction Act of 2015 (SB 350) – and is intended to inform California policymakers and its legislature on the impacts to the state of transforming the existing CAISO into a regional organization that manages wholesale electricity markets and operations across a broader western region. While this study focuses on the impacts to California and its electricity ratepayers, the authors note that the analysis can also be used by stakeholders in other states as a starting point as they evaluate potential impacts of regional market participation.

The key findings with respect to California ratepayer impacts, greenhouse gas emissions, reliability, and other societal impacts are as follows:

  • Ratepayer cost savings: The annual benefit to California ratepayers is estimated to grow from a modest $55 million/year in 2020 (assuming the regional ISO would only include the CAISO and PacifiCorp) to a baseline range of $1.0 billion to 1.5 billion/year by 2030 (assuming a large regional footprint that includes all of the U.S. WECC less PMAs). This is a result of savings from reduced capital investments for renewables portfolio standards; reduced production, purchase, and sales costs for wholesale electricity; reduced capital investments from regional load diversification; and reduced grid management charges for system and market operations. The growth in estimated annual benefits from 2020 to 2030 is due to a combination of (1) the assumed growth of the geographical footprint of the regional ISO-operated market; and (2) the increase in renewable generation, in part driven by California’s renewable portfolio standard (RPS), which requires that 33% of the state’s energy is produced from renewable resources in 2020, growing to 50% by 2030.
  • GHG emissions reductions: 2030 greenhouse gas (GHG) emissions associated with serving California loads are estimated to decrease from 49 million to 45 million metric tons. These projected 2030 GHG emissions levels are between 55 percent and 60 percent below California’s 1990 electric-sector emissions, and also well below the limits set by the U.S. Environmental Protection Agency’s (EPA) proposed Clean Power Plan (CPP) rulemaking.
  • Job creation: A regional market growing from a CAISO plus PacifiCorp footprint in 2020 to the larger regional market by 2030 is estimated to create 9,900 to 19,400 additional jobs in California, primarily due to making electricity more affordable.
  • Clean energy investment efficiencies: The efficiency of investments in low-cost clean energy generation, including investments in new wind and solar resources to meet California’s RPS, is estimated to increase with the implementation of a regional market.
  • Benefits to disadvantaged communities: Implementing a regional market is estimated to increase real income and jobs in several of California’s disadvantaged communities. Real income is estimated to increase by $170 to $340 on average per household per year, and net jobs are estimated to increase by 1,300 to 4,600 between 2020 and 2030.
  • Enhanced reliability: A regional market is estimated to lower the costs of maintaining reliability through load diversity and a reduced need for operating and load following reserves. It would also likely increase reliability through better real-time and day-ahead visibility of system conditions in the larger regional footprint and improved grid management and planning.

The study, “SB 350 Evaluation and Plan: The Impact of a Regional Power Market on California,” is co-authored by members of The Brattle Group alongside teams from Energy and Environmental Economics, Inc., Berkeley Economic Advising and Research, LLC, and Aspen Environmental Group. The Brattle team includes Principals Judy Chang and Johannes Pfeifenberger; Senior Associates Mariko Geronimo Aydin and Onur Aydin; Associates Kai Van Horn and David Luke Oates; and Research Analysts Lauren Reagan, Peter Cahill, and Colin McIntyre. The complete study can be found on the CAISO website.

Associated Experts
Chang for web
Principal
+1.617.864.7900
Judy Chang is an energy economist and policy expert with a background in electrical engineering. She has 20 years of experience in advising clients in transmission, resource, and strategic planning. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Pfeifenberger 034 edited
Principal
Mr. Pfeifenberger is an economist with a background in electrical engineering and over twenty-five years of experience in the areas of regulatory economics and finance. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Aydin 087
Senior Associate
+1.415.217.1000
Mr. Onur Aydin is a senior associate with an engineering background and over 10 years of experience in energy economics, electricity market modeling, and transmission planning. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Geronimo 062
Senior Associate
+1.415.217.1000
Ms. Geronimo Aydin addresses electricity industry issues and provides economic assessments in the context of strategic and resource planning, regulatory proceedings, and litigation. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Dl oates 14 new
Associate
Kai van horn 09 new
Associate
+1.617.864.7900