Sacramento muni begins talks to join CAISO Energy Imbalance Market

Dive Brief:

The Sacramento Municipal Utility District will start negotiations to join the Western real-time energy imbalance market, the first municipal utility to do so, the Sacramento Business Journal reports.
The Balancing Authority of Northern California (BANC)—which is operated by SMUD and made up of seven members—will also start negotiations with the California ISO after finalizing a study of benefits to evaluate the potential savings for customers if they joined the EIM.
It will cost SMUD about $6.5 million to obtain the necessary equipment, systems and workforce to join the EIM and cost $2.5 million annually for operations. But SMUD customers will save $5 million annually, the report said.

Dive Insight:

If SMUD joins the EIM, it will be the first municipal utility to join ten investor-owned utilities in a real-time electricity market growing throughout the western U.S. Seven of those utilities are outside CAISO's California service area, with Idaho power agreeing in April to enter the market in 2018.

Citing increasing penetrations of renewable energy, SMUD and BANC hope joining the real-time market will smooth integration of intermittent generation and help it trade electricity in a wider, interstate market.

But BANC noted in a statement that the key for an ideal outcome of the negotiations would be an agreement recognizing the needs of BANC's members as public power agencies. If all goes smoothly with SMUD's integration, other BANC members could follow suit. Members include the City of Redding, the City of Roseville, Modesto Irrigation District and Trinity Public Utilities District.

The Sacramento Business Journal notes SMUD will bring nighttime electric generation from windmills in the Sacramento Delta, dispatching renewable generation at a time when most renewable resources, such as sun, are not producing. That will mesh well in meeting California's renewables mandate, which seeks to run the grid on 50% renewables by 2050, as well as allow SMUD to export to other states.

That enhanced power trading capability has raised concerns. While CAISO points to clean energy as a significant factor for the $64.6 million in gross benefits the market generated since it was expanded outside of California, some critics said PacifiCorp's entry into the market could mean participants would use more coal-generated electricity.

Proponents say making renewables available to a wider market should help the entire region cut carbon in the long term, and CAISO hopes to eventually expand the EIM into a fully-fledged ISO. That push has attracted international attention, with Mexico's grid operator expressing interest this month in integrating the region of Baja California Norte into the market.