Led by a partnership between California’s grid operator and Warren Buffett-owned utilities, a few Western balancing authorities are daring to break out of their usual lonesome cowboy role and ride with a posse of electricity providers. They are making millions for themselves and their customers by doing so.

For decades, individual balancing authority areas (BAAs) in the Western U.S. operated independently to keep load and generation balanced. In the East, regional transmission operators and independent system operators developed interlocking systems with shared resources that make reliability a much easier lift.

In the fall of 2014, the California Independent System Operator (ISO) and the utilities of PacifiCorp, a subsidiary of Warren Buffett's Berkshire Hathaway Energy (BHE), launched an Energy Imbalance Market (EIM) to better manage system imbalances across regions.

“This EIM asks whether a system operator can manage imbalances in load and generation regionally so if one balancing area is up and one is down, the operator can net them against each other and not move generation to balance each individually,” explained BHE U.S. Transmission President and CEO John Cupparo.

The answer to Cupparo’s question is a resounding “yes,” according to the just-released Benefits for Participating in EIM report from the ISO.

It shows EIM benefits for Pacificorps East (PACE) and West (PACW) and the ISO reached $10.18 million in Q2 2015, while total gross benefits for the eight months of the EIM operation have been $21.41 million.

These numbers validate estimates made before the launch. They provide confidence that benefits predicted when NV Energy, another BHE subsidiary, joins this fall will be realized. They also boost expectations that returns will be even higher when Arizona Public Service and Puget Sound Energy join the market in 2016.

“This is clearly a ‘the bigger, the better’ situation in terms of optimizing the system,” Cupparo explained.

Looking back

For decades, each balancing area equilibrated load and generation going into each hour and adjusted its generation stack as circumstances imposed in order to stay in balance, Cupparo said.

The Western Electricity Coordination Council (WECC) was tasked with keeping critical transmission paths and intersections between balancing areas maintained so the overall system stayed in balance.

“But as renewable resources have penetrated the system, causing deviations in any given hour, with wind moving up and down and solar coming in and out, it has changed the dynamic and challenged utility system operators’ ability to manage inside their balancing areas,” Cupparo said.

California’s grid operator has long recognized the value in a wider and more diverse system. “If we have regional collaboration and we are able to move energy to our neighbors and accept energy from our neighbors to balance the system, it helps us a great deal,” agreed Angelina Galiteva, one of five Governors on the California ISO Board.

The latest data

“One of the important contributors to the EIM benefit are transfers, which allows lower cost supply from one BAA to meet demand in another. As such, the transfer volume is a good indicator of a portion of the EIM benefit,” the ISO quarterly report explains.

Utilizing the ISO’s state-of-the-art market software system, the EIM has been making such transfers in five minute (real time dispatch, or RTD) and fifteen minute (fifteen minute market, or FMM) increments. This report is the first to capture the granularity of RTD transfers.

Total transfers for April through June 2015 were approximately 260,452 MWh from PacifiCorp to the ISO and 35,368 MWh from the ISO to PacifiCorp. Transfers can be negative if RTD transfers flow in one direction and FMM transfers flow in the other.

Because only FMM transfers were used to calculate the Q1 2015 benefit of $5.26 million, the ISO did an FMM-only calculation for the Q2 2015 benefit which came to a comparable $6.12 million.

The 66% higher benefits through the inclusion of the RTD market in the calculation, the ISO reports, is due to “the added transfer volume and the larger price difference between PacifiCorp and the ISO in the five-minute intervals.”

The new report refines the allocation of greenhouse gas emissions adder payments from the ISO to Pacificorps but does not alter the total numbers. That information was referenced but not detailed in the report. It is likely to become more vital once the Clean Power Plan is in place and transfers of GHGs go to state emissions calculations.

The calculation of the EIM benefit also includes the ISO’s avoided renewables curtailment, a crucial feature of an EIM.

“Having a bigger footprint means being able to balance renewables with our neighboring states and helps us avoid over-generation,” Galiteva explained.

This will become even more crucial as California rapidly adds renewables to its generation mix to meet the 50% renewables by 2030 mandate now working its way through the state legislature. “Hitting 40% and moving toward 50%, we are looking at 800 to 1300 MW of curtailed renewables, which we don’t want to do,” Galiteva said.

An avoided renewables curtailment benefit is earned if renewables generation in the ISO is transferred to Pacificorps but would have been curtailed in the absence of that transfer. It is a cost savings benefit and can count as a GHG reduction and earn a renewable energy credit.

The total avoided renewable curtailment volume for Q2 2015 was 3,629 MWh, which included 1,474 MWh in April, 1,253 MWh in May, and 902 MWh in June.

“Assuming the avoided renewable curtailment displaces production from other resources at a default emission rate of 0.428 metric-tons CO2 per MWh,” the ISO reports, “the avoided curtailment displaced an estimated 1553 metric tons of CO2.”

Looking ahead

The EIM's regional approach means “avoiding the risk of stranded assets, being able to incorporate more renewables, being able to utilize assets in a much more optimized way, and being able to bring on facilities and bring on projects because we know we can use the energy or export it,” Galiteva said.

It offers both increased reliability and increased flexibility for the system, she added. It also offers the opportunity to create a special tariff for flexible resources.

Such a tariff would drive the growth of energy storage and dispatchable renewables, Galiteva said, “so that the resources that come online are good grid citizens and are able to respond to ISO controls and ramp up and ramp down.”

Though a regional construct, an EIM would also favorably impact local economics. “Local transmission capacity additions that allow new renewable generation to come online become more valuable with an EIM in place because it allows the local generation to not only be a player locally but to be a player regionally,” she said.

By quantifying the benefits of regional participation, the ISO EIM’s $21 billion in benefits during its first eight months sets the stage for much more, Galiteva believes.

It limits the amount of needed transmission in the short term but in the long term it helps identify where asset and transmission additions are needed and quantifies their value, Cupparo said. “Down the road, the EIM benefits can grow if we can bring incremental resources on without having to think about how the system will be managed.”

“Pacificorps has joined, NV Energy is joining, Puget Energy and APS are coming on, and others are calling to learn more every day,” Galiteva said. “And with more regionalism, we have more ability to reliably absorb higher penetrations of renewables.”