California has too much solar power. It needs another grid to share with.

This article was originally published on VOX.com on April 8, 2016 and was written by David Roberts

The US has no national electricity grid. Instead, it has a patchwork of grids, operated as closed-off regional and local fiefdoms with little trade among them.

One of the most important steps America can take to integrate more wind and solar power is to connect and expand those grids.

California is trying to take a small step in that direction. In the process, it is revealing the kinds of political tensions that stand in the way of grid integration.

California needs somewhere to put all its solar energy

The story comes to us via an excellent report by Lauren Sommer at KQED Science. It’s about a problem that’s beginning to hit in California — and will hit in other places in years to come, as renewable energy spreads.

Every so often, solar panels in California produce more solar energy than the grid needs. When these oversupply events occur, grid operators manually “curtail” solar production, cutting some panels off from the grid, effectively letting clean, zero-carbon energy go to waste.

solar curtailment
The dreaded curtailment in California on March 27, 2016.

This doesn’t happen all that often yet — roughly 2.2 GWh of renewable energy were curtailed due to oversupply in 2014, relative to the 44,000 GWh of renewable energy the grid used — but the problem is expected to get worse as wind and solar expand in the state.

This illustrates the key challenge that wind and solar (together known as variable renewable energy, or VRE) pose to self-contained grids: their intermittency. A lot of solar comes flooding in at midday, and then it all goes away at night. Sometimes it can go away all at once and come back a few minutes later (a phenomenon known as “clouds”). Wind can come all at once and then die down all at once.

It’s a challenge for today’s grids to handle both the quantities involved at peak VRE production times and the steep “ramps” up or down in supply and demand that come with VRE.

california's duck curve.
Fear the duck.

There are many ways to tackle the challenges of integrating VRE. I’ve written about the big picture here and more fine-grained, near-term solutions here.

But perhaps the easiest way to solve the problem, or at least postpone it, is to make the grid bigger. The larger the geographical area the grid covers, the more variations in supply and demand can be smoothed out. When one area is at peak VRE production, it can ship power to other areas rather than curtail it.

That’s just what the California Independent System Operator (CAISO) wants to do: link up California’s grid with those around it. “You’re operating your little piece of the system,” CAISO VP Keith Casey told Sommer of KQED, “but if you can operate it as an integrated whole, you can just operate the system more efficiently.”

Conceptually, this makes all the sense in the world. When it comes to the details, though, the politics can get sticky.

California’s clean grid meets PacifiCorp’s dirty one

There are a number of grid “balancing authorities” (grids run by particular utilities) near California, to which it could theoretically connect:

western interconnection balancing authorities

(Follow the link to see what all those acronyms stand for.)

CAISO’s first partnership is with PacifiCorp, a utility that runs a grid in Wyoming, Idaho, Utah, and Oregon.

CAISO and PacifiCorp.
CAISO and PacifiCorp.

(Earlier this year I wrote about Oregon’s pledge to go coalfree and how it would affect PacifiCorp.)

There are already some (currently little-used) power lines strung between the two regions, which could be used for greater coordination between CAISO and PacifiCorp. So they are planning an integration of their operations, scheduled to be in effect by 2019:

CAISO integration plan

A PacifiCorp-funded study found that the integration would benefit ratepayers across both regions. And it would certainly help CAISO find a way to export (rather than curtail) its excess solar energy.

But there’s a wrinkle.

If CAISO and PacifiCorp become one big grid, it opens up all sorts of regulatory and legal questions. Who manages an interstate grid? Who regulates it? Do California’s laws apply to it? Can they, legally speaking?

PacifiCorp is a big owner of coal plants — 60 percent of its energy comes from coal. All that coal will now effectively be on California’s grid. California has worked hard, economically and politically, to clean up its grid. What will happen to that progress?

These concerns led several state lawmakers to write the governor laying out a list of “significant unanswered questions” and requirements related to the integration.

California lawmakers' signatures. "Don't forget geothermal!"
California lawmakers' signatures. "Don't forget geothermal!"(CAISO)
California lawmakers’ signatures. “Don’t forget geothermal!”

They want to ensure that California’s pollution and greenhouse gases continue to be reduced, that California’s renewable energy mandates continue to be met, that California ratepayers benefit, and that investment not be shifted into PacifiCorp’s territory at California’s expense.

And because CAISO and its board were created by the legislature, presumably a new act of the legislature would be required to expand them, so these legislators will have to be heard and satisfied. (I asked a top staffer if their questions had been answered to their satisfaction; they have not.)

These parochial concerns make complete sense. These politicians are, after all, representing Californians.

But the bigger picture remains: Grid expansion has to happen eventually. The climate certainly doesn’t care about California’s emissions; it only cares about total emissions. If sharing VRE with PacifiCorp lowers overall emissions, it is to the good, even if Californians consume less VRE than they might otherwise have. Somehow, the economics and politics of grid expansion have to be worked out.

The perils of state-based climate and energy policy

California’s experience reveals some of the dysfunctions that come with the US lacking a coherent national climate policy. When each state with green ambitions has its own regulations, its own targets, its own mandates, even its own grid, it can feel protective of its own progress and loath to dilute it by hooking up with more laggardly states.

California has installed a lot of distributed solar PV.
California has installed a lot of distributed solar PV. (EIA)
California has installed a lot of distributed solar PV.

And California legislators are not crazy to feel that way. Wyoming and Utah are fighting tooth and nail against Obama’s Clean Power Plan. Wyoming is deeply invested in coal production. Oregon-based PacifiCorp is heavily invested in coal plants (though it ismoving away from them). Opening CAISO’s grid to possible federal oversight also opens it to various federal lawsuits, many launched by laggardly states, meant to stop clean energy regulations.

Then again, it’s the laggardly states that need the renewable energy, and the clean states that have got it — in California’s case, at least temporarily, too much of it.

Hooking up into larger and larger grids is part of the logic of transitioning to clean energy. It is necessary in order for California to hit its ambitious 50 percent renewables target. And it’s probably necessary in order for the US to hit the targets it promised in Paris.

On some time scale, a national grid is both necessary and inevitable.

In addition to their utility, power lines make for very dramatic photographs.
In addition to their utility, power lines make for very dramatic photographs. (Shutterstock)
More of these.

Transmission is a one-time fix

Variable renewable energy poses what you might call “whole system” challenges to energy grids. Once VRE rises to a certain level of penetration, it begins to swing between producing more energy than the system needs to and producing, in periods of extended calm or clouds, almost none.

Unless you can do something about those huge peaks and valleys, you need almost 100 percent redundancy — enough backup power plants to supply 100 percent of demand in the event that VRE is providing none.

But big coal and nuclear plants can’t just turn off in the morning and turn on in the evening. Even where they are physically capable, it’s too expensive. So you end up needing lots and lots of natural gas plants. Not ideal.

The way states and countries have achieved high VRE penetration to date is by cheating these whole-system problems. They cheat it by making the system bigger, hooking up transmission to surrounding grids so that they can offload the their occasional VRE surplus and import power to back up their VRE.

That’s what Denmark did, linking its grid to Sweden, Norway, and Germany so that it can export wind power when it has more than it needs and import power when the wind is idle.

denmark interconnections
Denmark, connected.

That’s what CAISO is trying to do, linking to surrounding Western states.

But note that this is a one-time-only way to postpone the problem. Eventually states or regions are going to reach a point where there are no more bigger grids to hook up. And then the whole-system problems return. At that point, the system can’t be made any bigger, so the problems have to be solved some other way.

We still have to sort out storage and shift demand

One way to tackle the problems is cheap and effective energy storage, to absorb the midday VRE surplus and return power at night or when it’s cloudy.

the garage of the future

The other big one is figuring out ways to shift demand so that it coincides better with periods of peak VRE production. There are lots of ways to do that, from incentives that change human behavior to automated networks of electric vehicle batteries to … water heaters.

California is smart to set its sights on a bigger grid. It will ease the immediate problem. But the state should also be pushing as hard as possible toward better storage and better demand shifting (and all the other strategies I covered here), because sooner or later the whole-system problems have to be solved, and the sooner they are, the greater the long-term payoff.

Slate of FERC Orders and Court Decisions Will Impact Grid

In Washington’s summer months, when it rains, it pours. There has been a slate of recent activity on the U.S. electric grid, some coming down as official FERC Orders, others coming down as court decisions. Some of these decisions have been positive developments for a U.S. shift towards a cleaner electricity grid, some of have been negative, and the implications of others still are unclear. In this post, we summarize each order and decision, and discuss briefly their impact.

FERC Accepts CAISO Energy Imbalance Market
At the June 19 Commission meeting, FERC accepted a California Independent System Operator (CAISO) proposal to implement an Energy Imbalance Market (EIM) in the West. By creating a mechanism which allows excess energy in one balancing area to reduce a shortfall in another, an EIM can reduce costs while bolstering reliability. EIMs are central markets which aggregate and balance generation and load across a wide geographic region, reducing system operation challenges that increasing penetrations of variable generation are expected to bring [1]. In the Western interconnection, the EIM opens the door to a more market-driven, rational, and efficient process for balancing generation and load than is possible at present with 38 separate and largely isolated balancing areas. PacifiCorp of California will be the first company to participate in the EIM, and NV Energy of Nevada has filed with FERC to join the market by October 2015. Participation in the market will be voluntary.

FERC Adopts New ROE Methodology for Electric Utilities
Also at the June 19 Commission meeting, FERC came to an important decision regarding the appropriate base rate of return on equity (ROE) for electric utilities building new transmission lines. Pursuant to the Federal Power Act, FERC must ensure that rates charged by transmission providers remain “just and reasonable.” In 2013, a group led by New England public utility commissions, attorney generals , and consumer advocates filed a complaint against utilities owning transmission lines (New England Transmission Owners or NETOs), arguing that the 11.14% return on equity they were receiving was “unjust and unreasonable” in light of the decline in interest rates and other criteria traditionally used to gauge appropriate rates of return for electric utility transmission investments. The hearings involved strong financial and technical arguments on both sides, but the focus of the debate was the methodology used to calculate ROE. In a very significant step, FERC adopted a two-step ROE calculation methodology that accounts for both short and long term growth projections – the same model used for oil and gas pipelines. The new method tempers the impact on ROE of fluctuations in short term growth benchmarks like interest rates by adding in a factor for long term growth linked to GDP. Using this methodology, FERC set the new base ROE at 10.57%. This result is lower than the prior industry-supported ROE, higher than the ROE requested by the complainants, and we believe a good compromise – both methodologically and quantitatively – which should be adequate to attract capital for needed for robust investment in transmission. It’s important to note that finalization of the 10.57% ROE is subject to the outcome of a paper hearing established by FERC to give participants in the case an opportunity to present evidence on the long term growth rate estimates used to calculate it.

Supreme Court Declines to Hear Missouri Cost-Recovery Case
In 2011, the Missouri Public Service Commission (MPSC) denied Kansas City Power and Light’s (KCPL) application to recover transmission costs incurred when transmitting power from a gas plant owned by its affiliated generation company in Mississippi to its customers in Missouri. The MPSC concluded that the utility could get the same power at lower cost without incurring the transmission cost. KCPL sought rehearing by the Supreme Court, arguing a violation of the supremacy clause of the U.S. Constitution, which holds that federal law preempts state law on transmission rates, so that a state could not reject a FERC-approved transmission rate. Missouri argued that KCPL was not challenging the transmission rate approved by FERC, but its own utility’s decision to purchase its remotely-generated power that required paying such a transmission rate, rather than cheaper power to which it had easier access. Since the Supreme Court declined to accept the case, the ripple effects of this decision remain unclear. The Edison Electric Institute has expressed concern that the decision could set a precedent for public utility commissions across the country to potentially deny recovery of FERC-approved transmission costs if utilities have a lower-cost supply option. As remote, low cost, utility-scale wind and solar resources displace retiring traditional generator closer to load, interstate transmission may become a proportionately larger cost factor in utility procurement decisions. Nonetheless, this ruling should not disadvantage remote clean energy as long as its net delivered cost – including FERC-approved transmission rates – remains competitive.

Federal Appeals Court Rejects FERC’s Handling of Transmission Costs in PJM
In June of 2013, the U.S. Court of Appeals for the Seventh Circuit endorsed FERC’s proposed broad cost-allocation for the multi-value projects planned throughout the MISO area, accepting the premise that the entire area would benefit from the value of the incremental high-voltage transmission needed to bring clean energy to MISO’s millions of electricity customers. One year later, the same court issued a strongly contrasting decision. The court ruled 2-1 that FERC was unable to justify why utilities in the western portion of PJM Interconnection territory should have to pay the costs of transmission lines primarily benefiting the eastern side. At issue was not the “roughly commensurate” principle established in 2009’s landmark Illinois Commerce Commission v. FERC (by the very same court), but rather FERC’s ability to provide enough evidence that costs would indeed be roughly commensurate with benefits. In a strongly worded dissent, Judge Richard Cudahy assailed the court’s call for more exact numbers, saying that a “mathematical solution to this problem…is a complete illusion,” and that the court should defer to FERC’s technical analyses in such cases. Judge Cudahy’s concern that the court is looking for a level of precision that is unattainable by FERC or anyone else seems well-founded. However, if the Commission is able to meet the court’s “roughly commensurate” standard, this now multi-year saga could end as a major positive for investment in clean energy transmission.

Appeals Court Throws Out FERC’s Demand-Response Order
Order 745 – issued by FERC in March 2011 – required that demand response (DR) participating in energy markets be compensated on a basis comparable to generators, i.e. at full locational marginal price. FERC reasoned that DR, the power made available to the market by the willingness of a customer not to consume it, was of the same value as that amount of power made available by a generator, and therefore should be priced the same. The order was designed to increase penetration of DR in organized markets, and analyses show that it did, indeed, have the desired effect.. However, in late May, the U.S. Court of Appeals for the District of Columbia vacated Order 745, on the grounds that FERC has no jurisdiction over retail activities, and that DR is fundamentally a retail activity subject to State regulation. The court’s ruling applies only to economic payments for DR, not capacity payments, and importantly, implementation of the ruling has been stayed until all appeals are heard. In the short term, the effects of the decision on the DR industry are likely to be small, especially when one considers that economic DR payments accounted for just about 2% of industry revenue in 2013. Over the longer term, the decision raises more significant questions. Specifically, the court’s finding on jurisdiction will almost certainly be tested in DR capacity markets, the source of most of the industry’s revenue, which could turn regulation of DR into a predominantly or even exclusively state-run affair. States, many of which have trumpeted the benefits of DR programs, will play a pivotal role in determining what impact this decision has on the DR industry. The ruling seems unlikely to significantly affect the environment for high-voltage transmission investments for two reasons. First, DR typically produces a different set of benefits than transmission, and second, DR cannot, even at very high levels of penetration, substitute for certain critical clean energy transmission functions, like accessing remote renewable resources and linking balancing areas. That said, if the ruling results in a sharp curtailment of DR, normally viewed as a “non-transmission alternative,” transmission investments may receive greater attention as a result.

[1] For more information on how an EIM works, please see this article.