The western energy market is evolving. The California Independent System Operator (CAISO) is working on its next round of initiatives, including opening its Day-Ahead Market (DAM) to other regional balancing authorities.
Today, non-CAISO balancing authorities (BAs) in the west fall into one of three buckets:
- They’re an independent balancing authority that manages its own real-time and day ahead operations according to its policies and Federal Energy Regulatory Commission (FERC) regulations, or
- They participate in CAISO’s Western Energy Imbalance Market (WEIM), a real-time energy-only market that’s open to entities outside CAISO’s territory, or
- They participate in SPP’s real-time energy market, the Western Energy Imbalance Service (WEIS).
With CAISO’s Extended Day Ahead Market (EDAM), California will allow entities outside its ISO territory to participate in its day-ahead market like it currently does with the real-time WEIM. Once EDAM is launched, BAs can choose to participate in WEIM or EDAM, both WEIM, and EDAM, or neither.
Like WEIM, EDAM is expected to offer significant cost savings benefits to the western market, but it will also require many BAs to rethink how they handle their day-ahead functions.
Here’s what we know today.
Resource adequacy and transmission
Before we get into workflows, we should discuss resource adequacy. For EDAM to function, all parties involved must be resource adequate — they must have sufficient supplies to meet their typical demand.
To ensure EDAM members are resource adequate, all participants, including CAISO itself, will need to pass objective sufficiency tests by reporting power obligations and available supplies. The EDAM software will then evaluate the data to ensure the entity won’t be leaning on the market to make up for intentional, long-term capacity shortfalls or that it won’t be dumping excess energy onto the market.
EDAM will also evaluate the entity’s transmission capacity as a part of the sufficiency test. The benefits of participating in a market like EDAM are only unlocked when you can transfer energy between the various balancing authorities. It’s critical that power can be moved from where it’s being produced to where it needs to be consumed.
By only admitting resource-adequate entities, EDAM ensures the marketplace can match supply to demand and “solve” or balance the marketplace.
EDAM: a new way of working
As noted above, introducing a centralized day ahead marketplace will require balancing authorities to rethink how they work. Today, the day ahead desk starts by creating a resource plan that addresses the organization’s electric needs for tomorrow. That plan results in hourly schedules that determine how each generator will be used. CAISO refers to these as base schedules.
No more base schedules
The most significant shift with EDAM is that it will eliminate base schedules. Instead, the balancing authority will submit generation options to CAISO. For example, the BA might tell CAISO that generator A can run anywhere between 150 and 450 megawatts (MW) tomorrow, and at 150 MW, it would cost $X, and at 200 MW, it would cost $Y, and so on. The market will evaluate the availability and economics of that generator and market conditions and send the BA instructions for how the resource should be deployed.
The EDAM market clearing engine will become the centralized data source for day-ahead availability and economics for the entire market. Armed with data from each BA, EDAM will then be able to balance the load at a much lower total system cost for all parties involved.
The other big change EDAM will bring to day-ahead workflows is around trading. The west currently has a vibrant bilateral market where people pick up the phone to initiate a trade. Turning those trade or interchange agreements into actual power flows is done by creating an e-Tag. E-Tags are like airline tickets for electrons, ultimately defining that interchange between a BA’s imports and exports. For the BAs participating in WEIM, they know what their real-time interchanges will be in advance based on the e-Tags they create.
With the day ahead market, they’ll start with a forecast. Then, the BAs will do intertie bidding, where tomorrow’s deals are evaluated, and forecasted interchange data is submitted to EDAM. How much will the BA buy? Sell? Will it be a net seller? For how long and at how many megawatts? What is the path of that interchange? This import and export data will be submitted to EDAM to model the interchange, eventually turning into a collection of e-Tags.
The third major change that BAs will need to navigate is around timelines. Participants must submit all their availability and economics data to the EDAM market before 10 a.m.; e-Tags will be done in the afternoon.
Other participation considerations
In some instances, balancing authorities that choose to participate in EDAM may not have day-ahead desks currently in place. The Public Service Company of New Mexico (PNM) is an example. PNM has a balancing authority called the EIM Entity Scheduling Coordinator (EESC), and a trade floor called the Participating Resource Scheduling Coordinator (PRSC). Today, PNM’s balancing authority and trade floor trade data back and forth in real-time. Under EDAM, both must submit day-ahead data on availability, economics, and transmission before 10 a.m. The balancing authority will also need to submit a load bid to CAISO. This change in current workflows might require the BA to create a day-ahead desk, or it could mean they enrich real-time standard operating procedures to cover the new day-ahead tasks.
Updating workflows in preparation for EDAM
CAISO has not said when EDAM will be launched, and there are still some challenges to work out for this new centralized day-ahead market, specifically around governance. Even though we don’t have all the details, we know that this next iteration of the west markets will require each balancing authority to evaluate and update their workflows in most cases.
And that’s where PCI Energy Solutions can help. We offer market-agnostic tools that enable you to optimize your resources, schedule trades, and analyze data to inform decisions around forecasting and operations. We also offer market-specific tools to communicate with market operators. At PCI, we’ll continue to monitor EDAM’s development and build the tools you’ll need as this initiative becomes a reality. We even build software for Balancing Authorities to optimize their operations.
Interested in learning more? Request the slides from our April 6, 2023, webinar, “Understanding New SPP Market Initiatives: RTO West and Markets+.“