A few months ago, The New York Times ran a prominent article that focused on a familiar stalking horse for U.S. energy policy analysts: the difficulties building new transmission. The gist of the story is that we have a system with so many quasi-independent jurisdictions and fiefdoms that building transmission to connect them becomes hopelessly embroiled in turf-wars and rent-seeking. Now, I’m not disagreeing with this narrative. Heck, I’ve served on “blue-ribbon” panels lamenting these problems and even participated in a national transmission grid study.
However, this is not the first time this narrative has surfaced, and it is frustrating to me that the focus is always so squarely aimed at the construction of new transmission lines when so much of the country has a real problem with utilizing the lines that are already there. This is the real balkanization of the transmission grid.
With the development of Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs), the U.S. has made tremendous strides in developing a system in which a wide variety of firms can gain access, on essentially equal footing, to the transmission assets overseen by RTOs. Despite a general perception that you can never build transmission lines in the U.S., the RTO framework has actually done a pretty good job building lines also, at least within RTOs.
But this is the state of affairs in only about half the country. There are still large swaths of the U.S. that still access transmission lines (or not) using a hopelessly byzantine (old-school Balkans) system of transmission property rights that rarely reflect the actual reality of a network’s capacity. One result is a bunch of “squatting” on transmission capacity through advanced reservations that are often not utilized. Serious conflicts of interests within vertically integrated utilities and simply a lack of much incentive to change amongst instinctively conservative regulated and government-owned utilities compound the problem.
The real magnitude of this problem was exposed quite elegantly in Erin Mansur and Matt White’s paper, Market Organization and Efficiency in Electricity Markets. They studied a moment when a balkanized Ohio merged with the largest of the ISOs, the PJM interconnection. Does that make PJM the Yugoslavia of ISO’s? (hopefully with a different fate). Mansur and White show that the utilization of the interfaces connecting roughly western Ohio and eastern Pennsylvania doubled virtually overnight. It’s important to absorb this fact. There were no new lines built, no big deregulation pushes, but rather a yielding of operational oversight from a disjointed system of control areas to one larger operator, and it was like transmission capacity doubled.
I suspect that similar, if not larger, potential exists today in the western U.S., which, along with the southeast, is the last stronghold of the balkanized utility operating regimes. It’s rarely mentioned in the press, but one barrier to achieving the Dept. of Energy’s dreams of an end to balkanization is, well, the Dept. of Energy – in the form of the Federal Marketing Authorities such as Bonneville Power Administration (BPA). Ten years ago, while one arm of DOE, the Federal Energy Regulatory Commission, was doing all it could to push a “standardized market design” that would help consolidate regional transmission operations, another arm of the DOE, Western Area Power Administration (WAPA) was building new transmission in part so it could declare its independence from the California ISO.
After decades of forlorn hope for the west, however, there are some really encouraging signs of progress. While a top-down implementation of a western balancing market sputtered out, a bottom-up approach emerged. A joint initiative between PacifcCorp and the California ISO have produced the first real prospect of a multi-state coordinated real-time “balancing market” for power. For the first time, generators in Oregon and beyond would be able to provide real-time support for fluctuating supplies from renewables in California. (Full Disclosure: I am on the Market Surveillance Committee of the CAISO and have supported this initiative.)
I don’t expect that the west will see the kind of dramatic overnight boost that Mansur and White document in PJM. While the machinery for coordination is slowly being put in place, there are still many legacy practices and rights that need to be accommodated and the geographic scope of the balancing market is still modest. There is also pushback. While the participation, or at least cooperation, of the Federal Marketing Agencies would be a significant boost, northwestern members of congress are urging the DOE not to “push” BPA and WAPA into participating in the Energy Imbalance Market.
Still one can hope that this is the first step toward a wider expansion, and that we can finally fully utilize the transmission that we’ve paid for.