CAISO president and CEO offers thoughts on grid reliability, extension of day-ahead market

August 13, 2020

by Paul Ciampoli
APPA News Director
August 13, 2020

Steve Berberich, who will soon retire as president and CEO of the California Independent System Operator, recently offered his thoughts on what he sees as the greatest challenges to grid reliability in the next ten years, CAISO’s stakeholder and governance process and the extension of the day-ahead market into CAISO’s Western Energy Imbalance Market (EIM).

Berberich, who made his remarks in a July 29 interview with the American Public Power Association’s Public Power Daily newsletter, has served 14 years with the CAISO, the last nine as CEO.

On Aug. 6, CAISO announced the appointment of Elliot Mainzer as its new president and CEO. Mainzer, who has served as administrator and CEO of the Bonneville Power Administration for the past seven years, will succeed the retiring Berberich on September 30.

Challenges to grid reliability

In the interview, Berberich was asked to detail what he sees as the greatest challenges to grid reliability in the next 10 years and what steps CAISO should take to address those challenges.

“I think by far the biggest challenge is moving from a thermal-based fleet to a renewable-based fleet,” he said. “I think that’ll be the biggest challenge — to make sure that you can get essential grid resources or services if you will from the renewable fleet, which we’ve shown that you can.”

But this means marrying up “the regulatory, contractual, dispatchability all across because mostly the renewable contracts” reward the producer “on how much they can pump out, not whether they can hold back and provide voltage support or reactive power or ancillary services of all kinds, things like that. But it is technically possible to do that.” Energy storage is “going to play a critically important role,” he added.

“But I think we just have to do that very thoughtfully to make sure we maintain reliability. If you have any reliability issues, that’s going to be a major issue with this transition.”

As for CAISO’s role, “we have to be very clear about what the grid needs to respond to the load profiles and things like that.” But CAISO’s markets “have to adapt to compensate more for services and less from an energy perspective. I think energy’s going to continue to play a big role in the markets, but I do think critical services are going to become a more predominant part of the market mix.”

CAISO’s stakeholder and governance process

Meanhwhile, Berberich was asked to detail how well he thinks the stakeholder and governance process in CAISO is working and whether he sees any benefits to this process as compared to other RTOs.

“We have a unique governance model and it’s become more unique with the energy imbalance market. No other ISO has an appointed board and I’m obviously on record as saying I think a regional grid is really, really important for integrating high levels of renewables. I think you necessarily have to have a regional board of some type.”

He said that “I’m just a big advocate of a regional grid, so you’ve got to have a regional, representative board.”

Nonetheless, with the delegation of responsibilities to the energy imbalance market governing body, and with potential expanded delegation for a day-ahead market, “I think that you can achieve what you need to achieve and I’m confident that we can find a way to balance representation on the governing body board with what the region requires to have a fully functioning real-time and day-ahead market.”

With respect to the stakeholder process, “I have some major philosophical thoughts on this in as much as I think that there is a major evolution of stakeholders over time and I think that has accelerated and when you set up a standing stakeholder committee I think you necessarily create stakeholders that are sort of more important than others and I think we have to be very cautious of that,” he said.

With respect to public power, “it’s easy for the IOUs to overpower the munis because of the resources that they bring to bear and I think it’s a good example of you’ve got to make sure you protect and allow participation of all the stakeholders.”

Some of the ISOs “have standing stakeholder committees and they basically decide on something before it ever comes to the board. I’m not in favor of that because I think it segregates stakeholders and I think that’s unfair to certain stakeholders,” Berberich said.

“The other thing I think about and the analogy I use is the United Nations Security Council. You have the five permanent members on there and it’s really, really hard to get another one on there” and you have that same problem with a stakeholder committee once it’s established.

“Who would have thought the wind association would want to be part of the stakeholder community ten years ago or storage five years ago, or microgrids for that matter? And I think that’s all evolving and changing and I wouldn’t want to be in a place where they were on the outside looking in,” Berberich said.

“I think we have an open, participatory stakeholder process, so my perspective is I wouldn’t change what we’re doing in favor of what some of the eastern ISOs are doing.”

Western EIM and extension of the day-ahead ahead market into the EIM

CAISO in late July reported that the Western EIM surpassed $1 billion in economic benefits.

The Western EIM allows participants to buy and sell power close to the time electricity is consumed and gives system operators real-time visibility across neighboring grids.

Berberich was asked whether he sees any challenges for the future of the Western EIM and if he views the extension of the day-ahead market into the EIM as necessary for its continued success.

“The day-ahead market has vastly more energy traded in it than the real time market so it should have comparably higher value and billions of dollars — and potentially a billion every year — that you could unlock and I think we owe that to the energy customers across the west.”

He also thinks it will help integrate renewables and trade energy.

“We have about 50 percent more curtailment this year than we had last year and you would think that you could just export that negatively priced or very low-priced energy. You have people that…do the resource commitment day ahead and unless you have a coordinated day-ahead market, people can’t take it because they’ve already committed resources. So I think that will be really important from a benefit perspective but also from a renewable integration perspective.”

He added, “there’s a lot of people in the west that seem to like this model better than a full RTO where they turn over transmission control and things like that, so I’m comfortable with the direction we’re headed.”

What are the obstacles? There are “some critical market design things that need to be taken care of. As an example, you’ll have to do some sort of transmission compensation. You’ve got to do some sort of resource adequacy methodology and things like that. Those are going to be hard to do, but I don’t think they’re insurmountable and they’re already handled as part of our bucket one, if you will, of design features for the day-ahead market.”

He is “confident that we can solve the governance issues, which is going to mean some expanded responsibility for the governing body, but also the market design things and once you’ve done that you’ve added a whole lot of value.”

Berberich added, “I also know that, to the extent we can leverage our platform, it’s a hell of a lot cheaper than standing up a new RTO.”

Transmission

Turning to the topic of transmission, Berberich was asked whether he sees a need for new transmission in the state and, if so, what the greatest driver of that need is.

There is a lot of transfer capability that already exists, he said. Moreover, there will be transfer capability that will be freed up “as you retire coal plants and other thermal facilities and I think it’s critically important that we locate new resources,” such as renewables and battery storage – “using those same transmission corridors and in that way I think we can limit the build that we may have to do,” Berberich said.

“I think we’ll have to do some build, particularly to bring renewables to market and to share them, but I think you can limit it if the policymakers are thoughtful about where they put renewables and where they’re procured,” Berberich said in the interview.

“You can do it really, really badly and build a whole lot of transmission or I think you can do it really smart and limit the transmission that has to be built,” he went on to say.

“A lot of people kind of get to the, well, if you move to microgrids and other things will you need new transmission? I don’t know that we’ll need new [transmission] for that, but I do think we’ll have to continue to use the existing transmission system even as you move to a more distributed system.”

He also addressed the question of what steps the grid operator has taken to mitigate rising transmission costs while ensuring that needed infrastructure investments are taking place.

“We have been very, very loud about talking to the public utility commission and other policymakers – not just here in California but throughout the region – that it’s critical that you re-use what you have so you don’t have to force a bunch of new build and I think that’s the best thing we can do,” Berberich said.

“We need to do what we can to re-use what we have” when it comes to transmission “because there’s going to be more pressure” to do things like undergrounding power lines, “which is going to be just hugely expensive.”

Berberich to remain with CAISO into October

Berberich will remain with CAISO into October to ensure a smooth leadership transition to Mainzer.

Mainzer has “demonstrated success leading a large, complex power and transmission organization will serve CAISO, our customers and stakeholders well,” the CAISO Board of Governors said in a statement. “We are happy to have a leader so knowledgeable about integrating renewables and passionate about building on CAISO’s organizational strengths and momentum toward low-carbon electricity.”

In his current position, Mainzer is responsible for managing the non-profit federal agency that markets 23,000 megawatts of carbon-free power and operates much of the high-voltage power grid across the Pacific Northwest, including major interconnections with California.

“I am grateful to have the opportunity to lead the creative and innovative team at CAISO and to enable California to reliably and safely achieve its ambitious clean energy and climate goals,” said Mainzer. “I also look forward to working closely with our colleagues across the West to build on the success of the Western Energy Imbalance Market and further strengthen regional coordination and technology innovation.”

Mainzer brings “exceptional leadership experience, wide-ranging contacts and inclusive strategic thinking to the CEO position,” the Western EIM Governing Body said in a statement. “We look forward to working with Elliot as we continue to enhance and expand the financial, environmental and reliability benefits of the WEIM.”

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