By Dan Catchpole
When you turn on a light in your home as the sun sets, the energy illuminating the room may have been bought five minutes before from a wind farm several states away.
Your utility pays to add power to the local grid in real-time, which is an efficient way to buy power from numerous generation sources at the best prices. Real-time markets have revolutionized the power buying model, allowing electric utilities to access lower-cost power generation throughout the day.
Most energy flowing on the power grid is scheduled the day before. But every 5 minutes, electric utilities from New Mexico to British Columbia buy and sell energy to meet demand while using the cheapest available power. They do this through the California Independent System Operator’s Western Energy Imbalance Market.
The WEIM is a real-time market that lets power producers sell surplus energy and power providers shop for cheaper energy. Since the market began in 2014, it has saved participants an estimated $4.2 billion and reduced greenhouse gas emissions by about 878,000 metric tons of carbon dioxide, according to CAISO.
CAISO’s control room in Folsom, California, oversees the precisely choreographed dance of electrons.
“Our focus is on the physics and economics,” CAISO Vice President of External Affairs Stacey Crowley says. “We manage the grid, but we use the financial market to move the lowest cost energy across the system.”
The more entities that join the market, the bigger the savings. In the first 6 months of 2023, participants saved nearly $800 million, according to CAISO.
The WEIM covers 10 states and one province—Arizona, California, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming and British Columbia.
Several types of entities participate in the market. Some are owned by investors, such as the WEIM’s inaugural participant PacifiCorp, which started the market with CAISO. Others are owned by the public, such as the Bonneville Power Administration and the Western Area Power Administration’s Desert Southwest Region.
Dozens of publicly-owned utilities and co-ops benefit from the market as BPA and WAPA customers. For example, WAPA passes on the savings to its customers, such as the Arizona Electric Power Cooperative, which then passes those savings on to its 11 members. Paying less to buy power can help electric utilities keep rates stable and, in some cases, pass those savings on to electric consumers.
Typically, about 5% to 10% of the electricity used by participants moves through the market.
Before the market began, a utility “had to figure out all of its deals on its own and get prepared before the hour either with (its) own resources or bilateral deals made beforehand,” Bonneville Power Administration Vice President of Bulk Marketing Rachel Dibble says. “Then, once real-time hit, that’s all you have access to—those deals you were able to make.”
If a utility needed more energy, its employees called other entities to find one with extra generation to sell.
Utilities participating in the WEIM still make sure they have enough energy to meet demand ahead of time, but the market allows them to share their excess generation and access power at cheaper prices instead of more expensive generation that the utility had planned to use.
“It also gives us each the ability to say, ‘Hey, I have more, and if you want to buy it from me at this price, you can take it. If there is any cheaper generation out there, serve my load with that generation,’” Rachel says.
Throughout the day, participants submit bids telling CAISO how much additional energy they have to sell or need to buy and at what prices. Every 5 minutes, CAISO’s automated system figures out how much energy WEIM participants need and the most economical mix of available generation to provide. CAISO notifies operators of cheaper generation resources to make more electricity and more expensive ones to make less.
“Really, the WEIM is software,” Stacey says. “We put in all the inputs and get the best solution.”
The market’s large size means renewable generation resources, such as wind farms and solar power plants, are used more efficiently and frequently. During the second quarter of 2023, that reduced CO2 emissions by more than 63,700 metric tons, CAISO estimates.
Like other entities joining the WEIM, BPA spent millions of dollars updating and upgrading its systems to get the granular data required to participate in the market.
The savings soon made up for the investments, giving BPA better insight into its operations, Rachel says.
The economic benefits roll down to the public power utilities that BPA serves and ultimately to their electric utility customers.
“The better we do in the WEIM, then that increases our secondary revenue,” which then rolls into public power rates for Bonneville’s customers, Rachel says.