More regional cooperation is needed to achieve Biden’s carbon-free grid.
You may or may not be familiar with the children’s song alluded to in the title, but it is what the US power grid needs to reach President Biden’s goal of a carbon pollution-free power sector by 2035. Recent announcements from the White House have focused on building thousands of miles of new electric transmission lines that connect the best renewable energy sources to consumers. But beyond the challenge of building the hard infrastructure, I’ve come to believe the hard part of “getting together” is interweaving markets and governance. State and local governments need to step up together so that the US can have a lower cost, clean electric grid.
Often people say the problem is that you can’t build new transmission lines. Building new transmission lines IS challenging. I worked on very difficult transmission siting cases while at the California Public Utilities Commission. Projects undergo intense scrutiny and redesign to address construction disruptions and minimize environmental impacts. Impacted communities find ways to put up roadblocks unless they receive expensive concessions. Ultimately, however, these time-consuming processes do often end up with lines getting built.
This is not to say every proposed transmission line gets built. Last week, Americans for a Clean Energy Grid, a non-profit supported by industry and environmental advocacy groups, issued a report listing 22 “ready-to-go” transmission projects, a number of which are hung-up in their approval processes. Many of these lines span balancing authority areas. Balancing authority areas are semi-autonomous sections of the grid that manage operations and reliability independently of their neighbors. When transmission proposals cross balancing authority area boundaries, disagreements over cost-sharing and siting can become charged and hard to resolve. This begins to point toward the underlying challenge — gaps in markets and governance.
Cooperation in the US electric grid is not new. About two-thirds of US generation participates in centralized regional electricity markets. These markets unlock tremendous value from existing infrastructure and power plants.
In the absence of centralized regional markets, each individual balancing authority needs to manage its own needs. A balancing authority can trade with its neighbors, but it is hard to set up these bilateral arrangements and many trading opportunities are missed. Instead, supply and demand are balanced by local actions including operating expensive fossil fuel plants and shutting down solar and wind generation. In a centralized regional market, on the other hand, the lowest cost power plants in the market footprint operate at any point in time.
Research by Prof. Erin Mansur of Dartmouth and Matthew White of ISO New England illustrates the value gained by adopting a centralized market. In 2004 the mid-Atlantic’s centralized market expanded into the Midwest. The regions were already physically connected through the transmission network and traded electricity frequently on a bilateral basis, but Mansur and White found that connecting the regions through an organized market uncovered many additional opportunities and produced $160 million per year in value – far more than the cost of integration.
Prof. Steve Cicala of Tufts University has produced an even more expansive study that looks at fifteen expansions that have occurred since 1999. Cicala finds that the transitions from the traditional balancing authorities to markets have reduced generation costs by $3 to 5 billion per year.
Some of the most exciting momentum to knit together electricity markets today is where it is needed most—in the western US. The western grid is managed as dozens of separate balancing authority areas, many quite small. Demand in the average western balancing authority is just one-quarter of the demand in the average eastern balancing authority. This means there are many untapped cost reduction opportunities in the west. It’s also particularly difficult to develop cross-region transmission lines.
Concerns about autonomy and control have gotten in the way of cooperation in the West. Divergent politics have played a role too. It is easier to keep electricity policy fully aligned with local political priorities when a balancing authority area sits within a single state. Hopefully, the current federal policy push will help align states. Rolling blackouts in California during the 2000-2001 energy crisis and in the summer of 2020 have also made policymakers nervous about cross-border ties.
At long last western stakeholders are working through these challenges. The big success so far has been the Western Energy Imbalance Market (EIM). The Western EIM is a centralized market where electricity consumers and generators in ten states can buy and sell electricity at the last minute. Even though the market is limited to these last minute trades, it has generated an estimated $1.3 billion in benefits. Market participants have been willing to give up some autonomy and control in order to capture their share of these benefits.
Despite this progress, most decisions related to building and operating power plants and transmission lines are still made in an uncoordinated way in the West. As long as this remains the case, the region will struggle to build an affordable, carbon free grid. We need even stronger collaboration, cemented through institutions, to secure the EIM market’s success and build upon it.
I’m currently serving on a committee recommending a future path for governance in western markets. The progress has been encouraging, with the first set of recommendations going before decisionmakers this week. The recommendations include expanding stakeholder representation and increasing access to market experts.
The West has begun to get together, and it’s time to begin increasing the tempo of the song. This is the soundtrack to a carbon-free grid throughout the US.
Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.
Suggested citation: Campbell, Andrew. “The More We Get Together, The Happier We’ll Be” Energy Institute Blog, UC Berkeley, May 3, 2021, https://energyathaas.wordpress.com/2021/05/03/the-more-we-get-together-the-happier-well-be-2/
Andrew Campbell is the Executive Director of the Energy Institute at Haas. Andy has worked in the energy industry for his entire professional career. Prior to coming to the University of California, Andy worked for energy efficiency and demand response company, Tendril, and grid management technology provider, Sentient Energy. He helped both companies navigate the complex energy regulatory environment and tailor their sales and marketing approaches to meet the utility industry’s needs. Previously, he was Senior Energy Advisor to Commissioner Rachelle Chong and Commissioner Nancy Ryan at the California Public Utilities Commission (CPUC). While at the CPUC Andy was the lead advisor in areas including demand response, rate design, grid modernization, and electric vehicles. Andy led successful efforts to develop and adopt policies on Smart Grid investment and data access, regulatory authority over electric vehicle charging, demand response, dynamic pricing for utilities and natural gas quality standards for liquefied natural gas. Andy has also worked in Citigroup’s Global Energy Group and as a reservoir engineer with ExxonMobil. Andy earned a Master in Public Policy from the Kennedy School of Government at Harvard University and bachelors degrees in chemical engineering and economics from Rice University.