Dive Brief:

• The California ISO (CAISO) will move ahead with the development of a stakeholder process to create a regional day-ahead market, building on the capabilities of the Western Energy Imbalance Market (EIM) it has operated since 2014, the grid operator decided Wednesday.
• EIM participants urged the CAISO leadership to consider an Extended Day-Ahead Market (EDAM) in a Sept. 16 letter. They estimated a day-ahead market could generate aggregate gross benefits between $119 million and $227 million annually.
• The current EIM has produced $736.26 million in total benefits since its launch in November 2014, according to an ISO assessment, with $86 million in the second quarter of this year. The market's system automatically finds and delivers the lowest cost energy across eight western states.

Dive Insight:

CAISO's move to develop a day-ahead market drew praise from regional clean energy advocates, even as all involved cautioned it would not be an easy task.

Adding day-ahead market services to the EIM "would allow utilities to better plan for and optimize renewable energy use on the grid through more efficient unit commitment and more effective integration of variable energy resources across a larger footprint," Jennifer Gardner, a senior staff attorney with Western Resource Advocates, said in a Sept. 19 statement.

Gardner, who is also chair of the stakeholder committee that nominates members for the Western EIM Governing Body, added that many issues will need to be addressed. "Important matters must be resolved during the upcoming stakeholder process and before market implementation, including how governance, transmission availability and costs, and greenhouse gas obligations will be addressed," she said.

Those same concerns were evident in the letter sent by 14 utilities participating in the EIM, supporting consideration of a day-ahead market.

"The issues to be resolved to make EDAM a reality should not be underestimated," the utilities wrote. "Governance structures must be considered that reflect the new market design and the legitimate interests that all within the broader market footprint will have in the operation and rules of the day-ahead market."

The utilities say the EDAM would likely require a test to ensure that participants "are not leaning on neighbors to meet their continued reliability obligations." And properly accounting for greenhouse gas emission obligations across different jurisdictions "will be essential to deliver the potential efficiencies of the market while respecting state policy prerogatives."

An EDAM Feasibility Assessment completed by CAISO identified potential aggregate gross benefits in excess of $200 million annually, but the utilities cautioned that the figure requires the market to "attract broad participation across the West."

CAISO is seeing some competition to its EIM. In June, the Southwest Power Pool revealed plans to develop a Western Energy Imbalance Service market to balance generation and load regionally and in real time. Conceived as an alternative to CAISO's imbalance market, SPP expects to go live in December 2020.