Analysis: California weighs imbalance market costs

OREANDA-NEWS. February 10, 2015. The California Independent System Operator on 11 February will release the first quantitative analysis of the benefits of energy imbalance trading with PacifiCorp, but skepticism is starting to grow about the prospects for the market in its current form.

The cost-benefit analysis conducted before the new structure started operations last November showed net savings from allowing market participants to trade energy to cover real-time deviations in demand and generation from anticipated levels. But market operations have not gone as planned from the start because initially fewer resources in the PacifiCorp balancing area participated in imbalance trading than expected.

California's primary grid operator, which operates the imbalance market, says the new market is running well. Most energy imbalance flows into California, helping back up intermittent renewables. Flows in the opposite direction occur as well, when solar over-generation drives California real-time prices very low — and sometimes below zero.

But energy imbalance market performance "has been driven by the need to periodically relax several key constraints in the market model," the California grid market monitor says. The assessment acknowledges that the grid operator has had to intervene consistently, setting prices manually because power balance violations and other constraints appeared much more often in the new market than they do in the wholesale primary markets. Imbalance prices without such interventions would have been significantly higher than power prices at nearby hubs.

The report on the new market's benefits will be released just a day before a 90-day waiver period ends that has allowed the market operator to conduct the interventions keeping imbalance market prices low. The Federal Energy Regulatory Commission has to rule on two more waiver requests from the grid operator: one is retroactive, for 1-13 November 2014 and the other is for February-November 2015.