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Energy Insights

July 2016  •  Issue 7


Steve Berberich photoA groundbreaking environmental law passed in California last year, Senate Bill 350, charts an ambitious course to fight climate change. It raised the state's renewable energy target to 50 percent by 2030, and designed a framework for development of a western United States electric grid.

In the law, the California ISO was charged with studying the effects and benefits of a regional energy marketplace. It was also tasked with proposing changes in the ISO governance structure to allow out-of-state utilities to participate in a newly formed regional ISO energy network.

Creating an interconnected electric grid in the western states is viewed as a critical component to lowering greenhouse gases, incorporating rising amounts of green energy into the system, and achieving the goal of getting half the state's energy from renewable sources, such as solar, wind and geothermal generation.

As outlined in SB 350, a series of studies were conducted to evaluate the impacts of a regional energy system in the following areas:

• Benefits to California ratepayers
• Creation and retention of jobs and other economic benefits to California
• Environmental impacts
• Emissions of greenhouse gases and other air pollutants
• Reliability and integration of renewable energy resources

In February, the ISO began a thorough and transparent process to complete the studies. Some of the leading economics and environmental consultants tackled what would be a pioneering body of evidence regarding regional energy grids.

Meanwhile, the ISO started the job of drafting a governance proposal that would include the voices of stakeholders from states with utilities participating in the regional energy market.

Hundreds of participants have engaged in public workshops, stakeholder calls and regular webinars on the many intricacies of creating a regional grid. The ISO released preliminary study results and a governance structure proposal, collected comments from the public, addressed those concerns and posted the feedback and responses on our website.

Along the way, the ISO provided information and opportunities for public input through diverse channels, including the release of 1.8 gigabytes of underlying data used in the SB 350 studies.

I'm pleased to announce that ISO's commitment to its twin missions have produced final impact studies and a working draft of a governance proposal that will be presented to the California Governor, and may be used to shape legislation. Both will be discussed at a public workshop in Sacramento on July 26. Click here for details on that event.

This edition of Energy Matters will give high-level explanations of the benefits of each SB 350 study and links to the final reports. Generally, the studies found advantages for California and the western region, including cost savings, grid reliability, and major strides in decarbonizing the grid.

Please read on for forecasts on how a regional energy market will potentially affect the key sectors of our state.


Steve Berberich, President and CEO

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Ratepayers to see savings in regional energy market

The studies found an annual net benefit to California ratepayers of $55 million a year in 2020, with those electricity cost savings growing to an estimated $1 billion to $1.5 billion a year in 2030.

Those results would likely increase over time, as California reaches its goal of getting half its energy from renewable sources.

The ratepayer savings stem from reduced capital investments, lower costs of wholesale electricity, and more efficient grid management.

Click here for Ratepayer Impact Analysis.

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Regional system will promote greener grid

FollowingDiscussionA regional grid is anticipated to help integrate larger amounts of renewable energy more smoothly. When solar output creates midday energy oversupply in California, that energy can be exported to other areas in the western ISO, reducing the instances of renewable source curtailment.

It would also spur development of more renewable use beyond the requirements, which compounds the positive impacts to the environment.

The studies found an interconnected grid also would improve real-time visibility of system conditions in a larger regional footprint and enhance management of unscheduled power flows.

Click here for Renewable Integration and Reliability Impacts.

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Western energy market will improve air quality

FollowingDiscussionA regional electric grid will yield dramatic environmental gains, including reduced greenhouse gas emissions and other air pollutants.

With a western states market, the state's electricity sector's GHG emissions is expected to drop by 8 to 10 percent in 2030, taking 4 to 5 metric tons of emissions out of the air. In the western region, that reduction is estimated to be 10 to 11 metric tons.

A fully functional western energy grid would lead to decreased emissions of carbon dioxide, nitrous oxide, sulfur dioxide and hazardous particulate matter both in California and the West.

Regionalization also would reduce the impacts of the electricity sector on land and water resources, cutting the amount of land needed for new wind and solar projects and easing pressure on biological resources and groundwater extraction for construction and operation of power plants.

Click here for Environmental Study.

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Regional grid will give disadvantaged areas economic boost

FollowingDiscussionThe economic advantages of a regional energy market will flow into the state's disadvantaged communities, bringing job opportunities and higher incomes.

Communities in the Inland Valley, greater Los Angeles area, and Central Valley will see anywhere from 1,300 to 4,600 more jobs between 2020 and 2030, and real household income will increase by $170 to $340 a year on average.

In disadvantaged communities, the regional energy market would also alleviate environmental effects of power plant development and reduce pollution from gas-fired generators in the San Joaquin Valley and South Coast air basins.

Click here for Disadvantaged Community Impact Analysis.

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Western grid will yield jobs, better incomes

Expanding to a regional ISO footprint will lead to thousands of new jobs and boost household income in California, the SB 350 studies found.

A western states electric system would create 9,900 and 19,300 new jobs by 2030 in the state, primarily stemming from lower energy rates.

The regional grid is also projected to increase household incomes by $290 to $550 a year in 2030 because of reduced energy costs to consumers.

Click here for Economic Impact Analysis.

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