In short
California’s electricity affordability and reliability challenges, focusing on CAISO’s transmission planning, interconnection queue reforms, Western energy market governance (AB 825), and how data centers/AI-driven load growth and distributed energy (batteries, virtual power plants) fit into the grid.
Guests
Ed Crooks (host). Amy Myers Jaffe, director at NYU’s Energy, Climate Justice and Sustainability Lab (former California resident). Elliot Mainzer, President/CEO of CAISO, which runs most of California’s transmission grid and wholesale markets, including the Western Energy Imbalance Market.
Key claims
CAISO has onboarded 26,000 MW of new generation in five years, including ~14,000 MW of 4-hour lithium-ion batteries; CAISO’s interconnection reforms cut study requests by ~70% (Cluster 15) and the Western EIM has produced $7.5B+ in production cost savings; AB 825 enables independent regional governance for Western markets to improve affordability while preserving state resource-adequacy responsibilities.
Notable examples
CAISO’s “no flex alert” outcome in 2023-2024; Silicon Valley grid buildout for hyperscalers; data center load forecast of 2.3 GW by 2030 (CAISO/CEC) vs much larger increases cited for ERCOT/other regions; CAISO oversight of utility-led large-load connections.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOIntroduction to California's Energy Landscape
0:00 to 0:33
Learn about the evolving energy landscape in California and the challenges faced.
“We've onboarded 26 ,000 megawatts of new generation onto our grid in the last five years.”
Understanding CAISO's Role
1:30 to 2:34
Discover the responsibilities and functions of CAISO in California's energy sector.
“It's been more than three years now, I see, since you were last on the show.”
Forecasting and Collaborative Relationships
2:34 to 3:43
Explore the collaborative relationships and forecasting challenges in energy management.
“But Elliot, you have a little bit of a less clear pathway in the sense that you're getting these load forecasts from the California Energy Commission.”
Challenges of Rising Power Prices
3:43 to 5:15
Discuss the factors contributing to rising electricity prices in California.
“And I wanted to get into some of those issues about the nuts and bolts of planning and forecasting and how you take that long term view and think about the investments you need to be making.”
Strategies for Affordable Electricity
5:15 to 6:38
Learn how CAISO is working to mitigate rising electricity costs for consumers.
“So focusing on affordability for transmission expansion.”
Interconnection Queue Reforms
6:38 to 7:46
Understand the reforms in the interconnection queue and their implications.
“energy market, all of those I think are helping us contribute to bending the cost curve in California.”
Impact of Legislation on Energy Markets
7:46 to 11:30
Examine how new legislation is affecting California's energy market and consumer refunds.
“Yeah, let's unpack a few of those things.”
Western Energy Imbalance Market Overview
11:30 to 16:28
Gain insight into the Western Energy Imbalance Market and its regional significance.
“to energize increasing amounts of transmission.”
Resource Adequacy and Capacity Planning
16:29 to 19:25
Explore California's strategies for resource adequacy and planning for energy capacity.
“the weeds in the West, let's unpack that just slightly.”
Data Center Load and California's Grid
19:26 to 23:24
Discuss the growth of data center loads in California and their impact on the grid.
“without obviating the responsibilities of the participating load serving entities to maintain load service responsibilities.”
Show all 20 chapters
Connecting New Loads and Future Collaboration
23:25 to 28:00
Understand the process of connecting new loads to the grid and the collaboration needed.
“And I'm confident that California will be a part of this equation and solution as well.”
Onboarding New Generation and Battery Roles in California
28:00 to 29:24
Exploring the evolving dynamics of California's electricity grid and the role of batteries.
“But to really be looking at what it's going to take to onboard new generation and how to bring the most efficient transmission solutions to mix.”
Tensions Between Individual Initiatives and Utility Control
29:24 to 31:37
Discussing the conflict between individual residents deploying batteries and utility companies' responses.
“They're finding that you can have very predictable load and very predictable ancillary services or energy services coming from these resources.”
Advancements in Battery Storage and Market Design
31:37 to 34:09
The essential role of battery storage in California's energy management and market evolution.
“Again, I can't speak and I won't speak for PG and E or any of the other utilities.”
Challenges of Cost Allocation and Resource Adequacy
34:09 to 36:23
Addressing the complexities of cost allocation and maintaining resource adequacy in California's grid.
“I think you're going to see in the next 12 months.”
Future Challenges and Renewable Energy Integration
36:23 to 37:16
Anticipating future challenges and the integration of renewable energy sources into the grid.
“And I think if we can really see that business model come together where you're lining up compensation, resource adequacy, participation, and real grid optimization, then you've got a winning equation.”
Reflections on Industry Progress and Innovations
37:16 to 40:18
Reflecting on the journey of renewable energy progress and innovations over the years.
“Just before we go, I wanted to think some more about the future, because it also seems to me that the challenges are only going to get more severe with everything that you're doing, the progress you've been making.”
Collaboration Across the Energy Sector
40:18 to 42:01
The importance of global collaboration in addressing energy challenges and sharing solutions.
“That was like a big debate back in the day.”
Optimism in Collaborative Solutions
42:01 to 43:16
Learn about the importance of collaboration in addressing energy challenges globally.
“And that is just the theme that has kept me going for the last 20 years and is going to keep me going for hopefully the foreseeable future.”
Closing Thoughts and Acknowledgments
43:16 to 43:58
Discover the importance of teamwork and innovation in overcoming future energy challenges.
“And particularly, as you say, when they work together and harness efforts towards achieving their goals, it's remarkable what can be done.”
Transcript
Automatic transcript. May contain errors.0:01We've onboarded 26 ,000 megawatts of new generation onto our grid in the last five years.
0:08Ed Crooks:They said all kinds of things about virtual power plant, no visibility, people don't really do it, you know, blah, blah, blah. I've talked to the aggregators in other locations and utilities in other locations, and they're not actually finding what PG &E says.
0:23Amy Myers Jaffe:You have to understand what's happening in terms of where the loads are coming in, where the generation's going to be, in order to do your job of managing the grid.
0:33Amy Myers Jaffe:Hello and welcome to The Energy Gang, a discussion show from Wood Mackenzie about the fast-changing world of energy. I'm Ed Crooks, and on this show we're going to be talking about California, often seen as the cutting edge of the United States in terms of change, and it's certainly been that in terms of energy for several decades now. To talk about California, it's a pleasure to welcome back a former resident of the state, Amy Myers Jaffe. Amy now lives on the East Coast, where she is the director of the Energy, Climate Justice and Sustainability Lab at New York University. Hi, Amy. How are you?
1:03Ed Crooks:I am great, Ed. And I have to say, I think my electricity is a little more consistent here in New York metro area. But we can debate that as we go on with the show.
1:13Amy Myers Jaffe:Yeah, you may be right. And certainly we can take that issue up with our other guest. It's a great pleasure to welcome back Elliot Mainzer, who is the president and CEO of the California Independent System Operator, CAISO, which runs the electricity transmission grid for most of the state. Hello, Elliot. Welcome back. Thank you, Ed. Nice to be with you. Nice to see you in as well. Yeah, it's great to see you again. It's been more than three years now, I see, since you were last on the show. Obviously, a lot has changed since then, and that's going to be one of the big things I want to talk about on this episode.
1:44Amy Myers Jaffe:Before we get into that, though, I think it's probably useful for our listeners just to get you to explain a little bit about what CAISO does. When I think about your responsibilities, I think of running the transmission grid, high voltage, long distance power lines that connect up the state and connect to other states as well. You also run the wholesale power market for California, for most of California, I think, is that right? And you oversee transmission planning. Have I got that about right? Those are the key roles? That's exactly right. We have those essential responsibilities for California, maintaining real-time reliability for about 80 % of the state, conducting transmission planning and interconnection queuing, making sure that the transmission system is operated reliably.
2:26And of course, we're also the operator of the Western energy imbalance market, which covers about 80 % of the Western United States. It's those two sort of dual responsibilities, core features for California, and also the operator of that broader real-time energy market across the West.
2:41Ed Crooks:But Elliot, you have a little bit of a less clear pathway in the sense that you're getting these load forecasts from the California Energy Commission. I guess your own team does the short term, but they do the long term. So that's got to be a little bit of a challenge in today's changing load market. It is, I would say, the thing that makes it work well, and I think something that we feel very positive about, we just finished up five years here at the KISO, is we have a very strong collaborative working relationship with the California Energy Commission, with the California Public Utilities Commission, the state agencies, the utilities.
3:17We have a sort of pretty clear understanding of our requisite roles and responsibilities. And so, yes, we work closely with the Energy Commission on their longer-term energy forecast. We work with the CPC on their integrated resource planning and resource adequacy paradigm. And then we sort of provide the physics and economic optimization of the system. So yeah, it's certainly there's a lot of uncertainty in that forecast, but I would say that we're fortunate to have a good, very open dialogue and strong constructive working relationship with that. Right.
3:43Amy Myers Jaffe:And I wanted to get into some of those issues about the nuts and bolts of planning and forecasting and how you take that long term view and think about the investments you need to be making. Before we get to that, though, I wanted to talk, first of all, about what seems to be the hottest topic in the power industry in the United States and in many other countries at the moment, which is affordability and prices and power prices. You don't need me to tell you that power prices in California have risen very significantly over the past 10 years. I mean, electricity in California has always been relatively expensive compared to other parts of the US.
4:23Amy Myers Jaffe:It's got a lot more expensive. The last number, I just dug these data out from the EIA, power costs for consumers averaged 32.6 cents per kilowatt hour in July. That is about double, almost double, the price just eight years ago in 2017. There's a lot of reasons for that. Don't need to go into exactly why there's been so much pound price inflation in California. Not least, I think, the impacts of the wildfires have been very significant and the need to invest in the grid following that. What I'm interested in, though, really from your point of view, Elliot, is what you can do about that. When you're sitting at Kyso running that grid, how can you contribute to making electricity more affordable for consumers or at the very least kind of mitigating the upward pressures on prices?
5:12Yeah, there's several things that we try to do. I think first and foremost, we're very focused on really conducting very forward looking, very efficient and innovative transmission planning. As a 501c3 public benefit corporation, our motivation is to take the major planning inputs from the state and try to develop the most cost-effective transmission plans for the state, including the use of advanced conducting, grid -enhancing technologies, non-wire solutions, etc. So focusing on affordability for transmission expansion. We also have tried to take a lot of friction out of the system in our interconnection queuing process.
5:49We sent a big package of reforms back to FERC last year. We put those into production after they were unanimously approved. And we've already significantly reduced the number of study requests that we're having to process, which significantly improves our ability to onboard new resources. And we focus really on making sure that we're operating a very efficient energy market, not only within the state of California, but as I mentioned, our Western energy imbalance market that's now been in place since 2014 has produced over$7.5 billion of production cost savings for electricity consumers, including a significant fraction in California.
6:23and of course contributed majorly to improving reliability, especially during the types of extreme grid events that we've seen in recent years. So taking friction out of the system, efficient transmission planning, interconnection Q reform, and running a really good efficient energy market, all of those I think are helping us contribute to bending the cost curve in California.
6:43Ed Crooks:So Elliot, let's take a step back here for a minute because the Q process is controversial all around the country. And CAISO has done this, you know, very interesting thing. It says you approve projects that have the least impact first. In other words, it's not a first come first serve line. You can't game the line by trying to get jump ahead. And also load serving projects get priority. I understand for independent power producers, that might be a negative, right? So that means that the incumbents here are kind of getting priority. So you have a shorter queue, but has the way you're doing it benefited consumers in terms of pricing?
7:26Ed Crooks:I get it. We have to, you know, these utilities have a big challenge. But part of the way we've all done what we've done is we've kind of had these bills blocking solar rooftop. We've got bills trying to throw down barriers in front of virtual power plants. So I know all those things are complicated to manage. Can you unpack that for us a little bit? Yeah, let's unpack a few of those things. So first of all, I think, and I know you guys have followed this for years, I think there has been a general recognition across the country that the traditional approach to interconnection curing form is just broken, needed to be fixed.
8:00We decided to kind of rip off the Band-Aid and really try to reformulate and get the order of operations correct. Transmission planning should not react to interconnection cues. It needs to lead interconnection cues because transmission takes so long to build, right? And what you want to do is you want to incentivize the development of projects that are located in places where you have existing or planned transmission capacity, whose developers have thought about their impacts on the grid and try to minimize their residual impacts on the grid, and for whom our load-serving entities who have the fundamental resource adequacy responsibilities have developed some level of commercial interest.
8:36And so we reformulated our process to say those projects that score highest on those criteria, their location, their impacts on the grid and the level of commercial interest, they're the ones that are going to go into the study process. And we're going to study a much more rational number of requests that bears a stronger relationship to the actual demand for power in California. So you still get a strong supply curve, but you whittle it down to a set of much more ready and we think viable projects. We've already, in what's known as our cluster 15, reduced the study numbers down by about 70%. And I can tell you the engineers are much happier to be studying relevant projects.
9:13We've put specific controls in place to make sure that the load-serving entities are not tilting the playground disproportionately in their favor. We've been very careful about that. And this rewards smart investment, rewards smart money, and I think we're going to have a much better outcome. We're already feeling really good about where that's going. So we're going to continue to fine-tune it. We'll continue to work with the IPTs, the utilities or regulators to fine tune the process. But we feel really good about where that's going. I think it's going to be transformational.
9:41Amy Myers Jaffe:And do you have numbers then on how much that's actually saving for consumers? I mean, as you say, the process is more efficient. Does that translate into actual kind of monetary value? It's a fair question. I'm not sure I can translate it into financial. And I also want to point out, you know, there's always a lot of sort of consternation and concern. fair about queues and backlogs and all that. But the reality in California is that we've onboarded 26 ,000 megawatts of new generation onto our grid in the last five years, right? Including about 14 ,000 megawatts of four-hour lithium-ion batteries.
10:18So while we've been going through these reforms, we've also been bringing enormous sort of historically large amounts of new generation onto the system. So the queue has not been a fundamental barrier to onboarding new capacity. We also continue today, have a pretty healthy inventory of available transmission capacity for our utilities. We're working off of about 65 gigawatts of what's known as deliverability inventory. So our utilities are still doing a lot of procurement and they're finding viable projects. We did 7 ,000 megawatts on board last year. We'll do several thousand megawatts this year.
10:54We've got to turn around and do it next year. So what we're trying to do is take the friction out of the interconnection queue so we can find the best projects that are lined up with the state's reliability and policy needs. And then also to make sure that we're getting transmission, not only planned, but energized so that we can maintain that inventory of transmission deliverability and not let transmission capacity become a major bottleneck to the onboarding of new resources, which would, of course, increase costs and equally importantly, undermine reliability and resource adequacy. So we're super motivated and I think becoming reasonably successful at maintaining inventory processing queues and planning and now starting to energize increasing amounts of transmission.
11:38Amy Myers Jaffe:Right. And of course, the other thing about electricity prices is they are increasingly becoming a political issue. And I was very struck your state's governor, Gavin Newsom, who knows, maybe wants to be president one day. You know, he's got his own podcast. He's certainly out there being a very public figure. And he had a big splashy announcement about refunds for consumers and reducing the cost of power for consumers. And he signed, I think it was about five bills that he signed into law. And he talked about, as a$60 billion being refunded to consumers, said the largest electricity refunds in a decade.
12:17what effect is all that having on the grid and on your business at kai so it seems i mean the
12:23Amy Myers Jaffe:crucial bill right is this one ab825 is that right and so what what impact is that going to have look i i work with you know nothing in california but i work with utilities and grid operators across the country right and affordability and reliability are just they're you know top of the list right now in in our system in our industry there's just no doubt about it and certainly you know, the governor and the entire legislature were very focused on affordability. This last session took it very seriously. And fortunately, I think for the West, one of the key legislative outcomes of this last session, these last few weeks was Assembly Bill 825, which is something that folks in the West have been working on for years and years, which was to make a fundamental change in the governance of the energy markets that we administer to allow the CAISA to actually operate the Western energy imbalance market and our emerging day ahead market under a fully independent regional governance structure and to have a new regional organization come in to help administer that.
13:27That is something that folks have been working on for years. There was just this incredible coalition who I think recognize the fundamental reliability and affordability value of a seamless Western electricity market who came together to support that. And at the end the governor supported in the legislature, passed it, I think it's 101 to two, very, very strong endorsement of that concept. So there is a strong sense that having that wide area energy market under that type of equitable governance structure will contribute to significant affordability benefits, not only in California, but in the other Western states who are grappling with many of the same issues.
14:02So we're obviously very encouraged by that development, very appreciative of all the people that came together, the regulatory community in the West, big stakeholder groups, utilities, the environmental community, the independent power producers across the spectrum to make that a reality after many, many years. Right.
14:17Amy Myers Jaffe:And just to be clear, in terms of the other states that are involved then in that Western energy imbalance, which other states are connected to California? Yeah. I mean, right now, again, we're very, well, first of all, thanks, Ed. It's a great question. First of all, as you know, and you've probably heard this concept before, you know, we're very fortunate in the West through the Western energy imbalance market to have major transmission connectivity between California and the Pacific Northwest, California, the desert Southwest, California, and all the way out into the intermountain West across Utah into Wyoming.
14:48And the Western energy imbalance market has been able to leverage that transmission connectivity and that resource diversity that exists across 11 Western states and 22 participating entities. You know, you've heard this folks say, we're fortunate we have a grid that's bigger than the weather here in the West. And we're able to move power and capability around, not only just on a day-to-day basis, being able to achieve significant production cost savings by leveraging differentials in cost during different time periods. But when things get tight, like we've seen in the last few years, whether super hot heat waves in California, the desert Southwest, or crazy cold temperatures in the Intermountain west or the Pacific Northwest, that marketplace has been able to move power around to where it's needed under the most critical periods.
15:35And this is becoming valuable for Western reliability. And so to now have this open up this new chapter where California and the other states will be able to maintain their longstanding jurisdictional responsibilities around resource planning and resource adequacy, retail rate making, legislative policy prerogatives, those are all protected very carefully for California and the other states, but the energy markets will now be administered under independent governance through a regionally selected board. And that is a very powerful opening. And we're certainly hopeful, and we're going to continue keeping our head down to make our extended day head mark in EIM really, really solid, that we get as many folks to participate in that as possible.
16:19And we're scheduled right now to go live with Pacific Corps next May to really kick off the official operations of our day ahead market.
16:27Ed Crooks:For the listeners who aren't in the weeds in the West, let's unpack that just slightly. So just to give people an idea, it means that California has more access to hydroelectric power from your northern neighbors and also from Idaho power if they join in. And then, of course, you've got natural gas at Envy Energy as about half of their system. I mean, I think what you're saying is it makes it less expensive. But, you know, in Europe, where they've kind of done a lot of that more forwardly and for a longer period of time than you have out in the West, there have been some hiccups about who builds capacity and who doesn't.
17:09Ed Crooks:And there's always the possibility that someone's going to free ride over somebody else's capacity. And so with this new governance board, how are you feeling about that? Do you feel like each state is going to really make sure that they're contributing to capacity additions? Yeah, it's a good question. I mean, I would say two things. Not only, of course, does California have access to it, but the reciprocal is absolutely true. I can tell you, in a deep cold snap in the Pacific Northwest, where I worked for many years, it's very fortunate to have power shipping out of the desert southwest in California up to the northwest, or vice versa on a crazy hot day in Phoenix.
17:48If California has extra solar energy to export, which it often does in the summer now, given our big fleet, there is real mutual benefit of this trade. The other thing is that, you know, speaking in California, one of the things that quite frankly, we think has been working well here in terms of our market is we have very clear definition of roles and responsibilities around resource adequacy in California, right? The California Public Utilities Commission has that jurisdictional responsibility around integrated resource planning and administering the state's resource adequacy program and requiring the load serving entities to do that long-term procurement.
18:24And we've been bringing this very steady and large amount of new capacity onto the system and really driving towards that one in 10 loss of load probability standard for resource adequacy and making a ton of progress. The other states outside of California are also working to different degrees to make sure that they have clear roles and responsibilities around resource adequacy as well, right? Because these markets have to be built on a solid foundation of resource adequacy. That's absolutely essential. We are not planning or interested, certainly in California, I think in other parts of states to develop centralized capacity markets in the West.
19:01That is not a concept for which there's a lot of interest out here. Instead,
19:06Ed Crooks:the states, the regulatory companies - Not working well on PJM, so okay, interesting to know. It's just not something that we're interested in here. We think there are important roles for the states and for the regulatory community and for the load-serving entities to get to sufficiency. What we're able to do, though, is that in lieu of a centralized capacity market, to be able to bring the physics and the economics of wide area operation and leveraging diversity and connectivity, that's where you get that economic value without obviating the responsibilities of the participating load serving entities to maintain load service responsibilities.
19:42So that paradigm, I think, is very important and will be central to the success of the Western energy markets.
19:48Ed Crooks:Now, are you worried about, you know, the topic of the day, you know, large load data center fluctuations? I'm training in one state or another state or I'm moving it around to the different states. Are you feeling like your system is going to be able to respond to that? I understand that CEC is saying that data center load just in CAISO is going to go up 2.3 gigawatts by 2030 and 3.3 gigawatts by 2035. The system you have in place today going to do that easily?
Read the full transcript
20:21Amy Myers Jaffe:Well, and actually just before you answer that earlier, because I think that that's a great question. And as I say, what everyone's talking about, 2.2 gigawatts, whatever. What was that number, Amy, you just had?
20:31Ed Crooks:2.3 gigawatts by 2030. Yeah.
20:33Amy Myers Jaffe:So it's quite interesting to me that actually on the scale of what some power markets are going to see in the US or what they're expecting to see, that's actually quite modest. Right. If you think about in Texas, I was looking at the numbers for ERCOT a couple of days ago. They're expecting, I think, 22 gigawatts more data center load by 2030. If you look at sort of Virginia and parts of PGM, which I've been talking about, again, they're expecting kind of more than 10 gigawatts, certainly, of increased data center load over there. Part of this is a bit paradoxical, right, which is that California is home.
21:11Ed Crooks:Well, maybe because electricity prices are so high in California.
21:14Amy Myers Jaffe:Well, exactly. In California. I was about to raise exactly that possibility because, as you say, you know, they've got all the tech companies there, right? that that's where the headquarters are, but it doesn't seem to be a state where a lot of people are rushing to build data centers. So, Elliot, yeah, I'm interested in your interpretation of that fact as well. Yeah, no, it's a good question. I think, as you acknowledged, I mean, this is where, you know, the data center revolution, the whole artificial intelligence ecosystem was originated in California. We do have interest from the hyperscaling community.
21:45As a matter of fact, we are already in the process of building out the grid in the Silicon Valley to accommodate the next wave of growth. As you pointed out, there is a lot of work to try to determine right now between the Energy Commission and the utilities, just exactly how large that growth is going to be in the coming years. And so we're working very closely with the regulatory agencies. Our next phase of transmission planning will incorporate the very, very latest forecasts, and we'll continue to try to stay ahead of the curve on that. So it may not be at this point as large as some of the other regions, but I know the state is very interested in continuing to cultivate this business.
22:24The utilities would like to bring some of these resources online. It's an important part of economic development in California. It's also the strong new customer base. It can actually help if done right on the rate side. So we're going to be there supporting it in terms of transmission infrastructure. We've also created some space in our interconnection queuing processes to make sure that the hyperscalers and data centers are able to kind of participate in that process so that we can get the best granular information about where they're going to be operating. And then, of course, the question that I think we're all asking is what are some of the other services that these resources might be able to bring to the system?
23:04Will they be able to be part of the load flexibility equation during extreme grid events? Will that be a legitimate capability? What will they install in terms of backup capability? What will be their impact on the grid in terms of resource adequacy and helping us with actual infrastructure optimization? So we're staying very connected. I'm working with EPRI and the DC Flex initiative and communicating with many of the entities. And I'm confident that California will be a part of this equation and solution as well. And we're just going to stay on it and try to stay ahead of the curve. So once again, from our perspective at the CAISO, transmission infrastructure does not become a limiting factor on their growth.
23:46Amy Myers Jaffe:And to that point about data flexibility, do you have any answers yet? I mean, what is your sense of how flexible data center loads can be? I don't have a hard answer to it yet, but when we think about the – I've said before, when you think about the potential positive opportunities and benefits of artificial intelligence, and you think of all the brilliant people that are going into working on the grid and technology, if there's an opportunity to figure out the ability to bring some flexibility to the equation, they're going to figure it out. I say let's apply the supply artificial intelligence and human intelligence to the question of flexibility of data centers.
24:22I think there will be some benefits. I'm not sure every facility will be able to provide that. But I think the incentives are going to be there because we know that we don't want to take too much time to start getting these resources on the system. Right. It's it's an international race. I know the country is very vested in the success of the data center economy in the United States. And we want to make sure that we're able to bring them on. And if for some period of time they come on the grid and they can't operate 24 by 7.000, they might have some ability to back off during extreme periods. So I think everybody's incentives are lined up for innovation in that space.
25:02Amy Myers Jaffe:And then the other thing I'm really interested in is the question of just the process of how you get a new large load connected to the grid. So I was looking at this and in a way I was a bit surprised. So you've got a statement on your website about large loads and the way you think about them. And you say Kaiso is not the organization that has primary responsibility for connecting new large loads up to the grid. In other words, I'm a big data center operator. I want to build a data center in California. I want to get it connected to the grid. The first call I make is not to Kaiso. It's to one of the individual utilities.
25:40Amy Myers Jaffe:And in a way, that surprised me because I thought, surely you have to have that visibility. You have to understand what's happening in terms of where the loads are coming in and where the generation is going to be in order to do your job of managing the grid. And so, as I say, I wonder if you could kind of explain a little bit about how it works and where you do get involved and what your responsibilities are. And do you ever have the right then to say to people, well, actually, I'm sorry, you can't connect this load up because, you know, we've done the maths, we've done the planning. We can see that there's not going to be enough generation available to cover this.
26:16No, that's right. At the end of the day, it does require a collaboration with the utilities who will ultimately host these data centers on their system. What we're typically doing is we will review those interconnection studies to make sure that they are consistent with reliability and that they are also aligned with our broader bulk grid transmission plant. So we do have oversight and we do have some ability to influence that for sure. But you're correct. We are not necessarily the first point of interconnection on that. And as I mentioned earlier, the utilities are very actively engaged right now with the data center community, really trying to get a handle on exactly what are going to be the best areas to locate within their systems, what the demand will look like, and also exploring some of these questions that you asked before about flexibility services.
27:07So, you know, we have that broader kind of reliability and planning overlay and engagement on the studies, but we also have to work with the local utilities who have the primary commercial relationships.
27:18Amy Myers Jaffe:Right. And does it sort of work that there are, as it were, two sets of studies then, one for supply and one for demand? So in other words, there's the interconnection queue we've been talking about for new generation seeking to get added to the grid, and then another separate queue for new loads seeking to get added to the grid. Is that how it works? That's a fair characterization. I think our principal focus from our transmission plan that we do both on a long-term basis, kind of a 20 to 25-year outlook, and then our 10 to 15-year transmission plans is to take the resource information. Of course, it's always indexed back to load forecasts, which will have the data center load embedded into them.
28:00But to really be looking at what it's going to take to onboard new generation and how to bring the most efficient transmission solutions to mix. And this area, as I will also say, is particularly around data centers, is an evolving area of collaboration with the utilities. I think a year from now, we'll have some greater clarity. We posted that information on our website just to provide some additional insight into the evolving thinking and the evolving processes. But it will be an iterative process, especially as we see the different commercial business models, the different ways of bringing generation to the system, the different questions around cost allocation, and just the general framework that ultimately evolves in California to get these resources onto the system.
28:45So it's a work in progress and something quite dynamic.
28:48Ed Crooks:So I'd like to kind of revisit my question that got deferred, right? Because you mentioned at the top of the episode that batteries were really playing a pretty significant role in stabilizing the system. And I'd like to kind of help have you help us understand the distinction between batteries where you have visibility onto those batteries and batteries where some other group of people say this isn't working for me. And so I'm putting in a battery or some aggregators coming into some low income community and say, hey, we're going to put some solar panels and some batteries in for you because you can't afford your electricity bill.
29:23Ed Crooks:Like there seems to be a real tension in California between the individual resident who wants to take matters into their own hand and use new technology and the way the system is set up here where you're really favoring the utilities. And let me just throw in, sorry to be such a critic, but we had PG &E on the podcast, and they said all kinds of things about virtual power plant, no visibility, people don't really do it, blah, blah, blah, that I've talked to the aggregators in other locations and utilities in other locations, and they're not actually finding what PG &E says. They're finding that you can have very predictable load and very predictable ancillary services or energy services coming from these resources.
30:14Ed Crooks:But PG &E seems to be really unsuccessful with it and wants to like blot it out. And so, you know, from the operator point of view, is it really a problem when individuals in California take matters into their own hands? Who are deploying the batteries that you can see? Sure. Let me start out just speaking for the CAISO, the things where we have a strong span of influence, et cetera. So first of all, we get excellent visibility through our transmission planning process, our interconnection queuing process, and of course, operations to the 14 ,000 megawatts of four-hour batteries that have come onto the bulk electricity grid in the last five years, right?
30:54And those resources have played an invaluable role in strengthening resource adequacy in California. And you see them operate. They really are doing exactly as designed. They are able to charge and store extra surplus solar energy during the middle of the day. And then they're able to re-inject it back into the evening seamlessly. And it's worked really well. They've provided ancillary services to the grid. They provide that energy shaping. And I can tell you when I head on down to the floor and speak to the control center operators, particularly in summer, they are very pleased with that fleet.
31:29And I give a lot of credit to the battery storage industry for showing up in a constructive fashion as we continue to work through complex issues. We're continuing to refine the market design for batteries. But at the end of the day, energy storage is a key part of the portfolio in California and part of the reason that we've been able to get through the last three very challenging summers without a single flex alert in California. it, right? That's a good story. So on, and yes, I think the state, look, there's a lot of energy and I understand, you know, some of the concerns that you're articulating about trying to also make sure that we have a healthy distributed energy resource ecosystem in California and that we're able to tap into virtual power plants and do all that.
32:09Again, I can't speak and I won't speak for PG and E or any of the other utilities. What I will say again is what we're, our focus at the CAISO is always to try to stay ahead of the curve, right? We're trying to anticipate where things are going and we do not want to be a bottleneck to the development of resources. And so what we are doing right now is we are working with the distribution utilities to try to make sure that we have really clear communication and information transfer protocols between the grid operator and the distribution owners, right? So that as those distributed energy resources and virtual power plants and load flexibility start to grow in the years ahead that they will either be able to operate very effectively within the distribution system or to the extent to which they are interested or capable be able to come in to the wholesale energy market and participate on the level playing field we were the first iso in the country to have a fully approved for quarter 2222 tariff a couple years ago and we're very motivated i understand there's a lot of work.
33:14And again, I'm certainly familiar with the debates and the dialogue, and I think people bring a lot of passion to this issue. And I think probably we are, as I've said many times before, we are fans of seeing load flexibility and distributed energy resources participate actively in California. Obviously, right now, there's still a lot of work to figure out the business model, to figure out the cost allocation, to figure out the compensation mechanisms, to figure out the RA qualifications. We see all that. But what we're going to do at the CAISO is to make sure that your bulk grid is ready, that we know what level of visibility we need to operate the wholesale energy market effectively, and quite frankly, to make sure that not only are we able to have healthy participation of distributed energy resources and load flexibility in California, but for all the different states and utilities that we operate, particularly through now the emerging extended dayhead market, that these resources can participate in other states as well to the extent that they're interested.
34:08So a lot more work to be done. I think you're going to see in the next 12 months. A lot of focus on this by the utilities, by policymakers, the service providers, because everybody knows there's latent capability. It's just you got to get all the pieces lined up, right?
34:21Ed Crooks:And the interesting thing in some places, it's working like, I mean, crazy like Vermont, you wouldn't even think solar and batteries is really going to be viable in Vermont, given the weather and the seasonality. But they have actually flattened their duck curve. But But when they interact with New England ISO, New England ISO hasn't done, I think, as good a job as KISO in terms of maintaining visibility into these distributed resources. And so, you know, like you're saying, there's like many different dimensions to this problem of how to integrate these resources in. And I do think they play, like you're saying, a really substantial role and also in really managing, you know, how much generation resource capacity do we need to really, you know, handle these extreme days.
35:12Ed Crooks:You know, we don't need to be building$10 billion nuclear plant to handle 10 days of the summer. Right. And so thinking that through, it sounds like, Elliot, that you guys have a pretty good process that maybe needs some refinement, but that you understand the issue. We unequivocally understand the issue. I can tell you that we physically feel it and the potential on super hot days. We know what the low duration curve looks like in California and we're encouraged. And I'm also, I am actually optimistic, quite personally, speaking with so many folks in California and across the West, that there is, and just the energy that you bring to this, I can feel the level of engagement.
35:51There's a lot of energy going into this issue. And I think that the state and its many partners is really trying to figure out how you put it together because you guys led off with affordability. And I know that one of the principal concerns that we have in California still amongst our policymakers is how do you do this at the distributed side in a way that really actually lowers costs for the consumer? How do you make sure that you're paying for the right services, you're getting the right benefits, and at the end of the day, you're bending the cost curve? And I think if we can really see that business model come together where you're lining up compensation, resource adequacy, participation, and real grid optimization, then you've got a winning equation.
36:35I don't think the factors in the equation have been totally lined up perfectly yet, and we've got to get that done.
36:40Amy Myers Jaffe:Right, because that whole question of cost allocation has been one of the most difficult things in terms of new transmission investment, hasn't it? It's just been, I know, really, really painful for people trying to develop projects. This is, again, part of the ethic of the CAISO. You know, we're an organization that's very focused on delivering results and actually energizing new infrastructure, right? The planning is very, very important, and we're very supportive of all the different planning efforts. But we also need to bring new capacity online, get resources generating, and continue to make real and material progress on resource adequacy.
37:15This is so important right now for the broader health and affordability of the grid.
37:20Amy Myers Jaffe:Just before we go, I wanted to think some more about the future, because it also seems to me that the challenges are only going to get more severe with everything that you're doing, the progress you've been making. As you say, lots of interesting developments going on. But that 2045 goal is out there. I was looking earlier at your draft transmission plan that you published in April, and it's available on the website. Very interesting. I recommend people go and take a look. And that is talking about still very, very significant quantities of additional wind and solar being added to the grid. I think it's another 30 gigawatts of solar.
38:00Amy Myers Jaffe:It's seven gigawatts of wind in-state, another nine gigawatts of wind out-state will be connected up. So that's a very large number of variable renewables that are going to be added to the grid. That is going to make managing the grid increasingly challenging, isn't it? Yes, it will be challenging, but the challenge is energizing, right? And I don't want to sound Pollyannish here, but that's what gets us up every morning coming to work. We enjoy these challenges, right? I think all of us at the CAISO are many partners. These are very, very meaningful challenges. I think you also have to remember, you have to contextualize this all in the context of our existing portfolio, right?
38:39I mean, we are certainly bringing on a lot of new variable generation, but it's being built on a base with a very healthy hydroelectric portfolio. We've got 25 ,000 megawatts of natural gas that still operates in California. We've got a nice geothermal base. We have a very healthy transmission grid that we're continuing to expand. And I think that there are going to continue to be many learnings. As we've seen over the last 25 years, there's going to be resource innovation. There's going to be new forms of generation that are going to come online. We're going to continue to have the benefit, as other states will as well, of managing the variability and volatility of variable generation over a broad electrical footprint.
39:19That is extremely valuable, not only to California, but that it's going to be valuable to the desert southwest and the intermountain west. Remember, we're not the only state bringing large amounts of solar and batteries and other variable generation on their system. That's happening across the Western United States. And we get to work together to figure out how to leverage that diversity and take advantage of the resource in California. Yeah, the hydro up northwest, the resources in the desert southwest, that vast transmission connectivity across Nevada and Idaho and Utah and Wyoming and across Montana, et cetera.
39:54So these are assets and there will be learnings. I often think back, I came in the industry in the late 90s, I think it was 1998, 1999. And I always laugh with my friends who are all around in the early days of renewable energy. And I'm sure, Amy, you were there. Ed, you've been watching the industry for a long time. It's just mind boggling where we are today, right? We just never would have imagined.
40:17Ed Crooks:People were arguing whether they could go past 10 % renewable energy. That was like a big debate back in the day. So I'm ready to bet on us and the next generation. I also, I get a huge kick. One of my favorite things at Kaiso is I just, we, every year we bring in these amazing summer interns or, you know, fresh out of college and grad programs who are just so motivated and so bright and so resourceful to figure out issues. And of course, my existing team, I am extremely proud of my team. I've just hit my five-year anniversary at the CAISO, and I just am so honored and so fortunate to have such a committed group of people, right from my right-hand person, Mark Rothlater, our chief operating officer, all the way down to every last staffer and hardworking person at Control Center, and everybody from settlements to policy to GC to finance, you name it.
41:11They're an HR group, amazing group of people. So we are in good hands. And I think we're going to figure it out, right?
41:20Ed Crooks:It was a miracle that you guys did not have a flex alert in 2022. That was nothing short of a miracle. Well, 2022, to be fully accurate, we had plenty of flex alerts in 2022, but that was the last time. So 2023, 2024, and of course this summer, especially with all the new resources that have come online with the benefits of the Western Energy Imbalance Market, Remember, it wasn't just here. The other parts of the West have had some very, very stressed grid conditions, and they've been supported from a reliability perspective from that wide area market. We're all benefiting. That is the power of wide area collaboration, right?
41:56And we are all part of one integrated Western electricity grid. And the more we can work together, the more we can break down the barriers between ourselves and really recognize our shared interest in reliability and affordability for the consumer, the better we're going to be. And that is just the theme that has kept me going for the last 20 years and is going to keep me going for hopefully the foreseeable future. So I appreciate the opportunity to talk with you guys about all this stuff. It's an exciting time, you know, and the one thing I'll also mention, you know, I'm very blessed. I'm able to interact on a regular basis with great operators from the UK and Ireland and Denmark and Australia, out in Texas, where they're dealing with a lot of the same issues.
42:40And it's the power of collaboration, not only across the West, but across the world. We're learning from each other. We're sharing experience. We're coming up these curves and figuring it out. And so I just think we stay optimistic. I think we stay intellectually honest about the issues, right? That we can't wish away these challenges, can't pretend they don't exist, but let's also recognize our capacity to address them successfully.
43:04Amy Myers Jaffe:Yeah, that is a great point. And certainly, as you say, in the long run, betting against human ingenuity has never been a winning bet. People can do things that you would never have believed possible. And particularly, as you say, when they work together and harness efforts towards achieving their goals, it's remarkable what can be done. Well, we certainly wish you all the best facing the challenges that you are going to be facing over those coming years and decades. It's going to be fascinating to see what you managed to achieve and how that evolves. But for now, we're going to leave it there.
43:41Amy Myers Jaffe:It's been great talking to you, though. Thanks very much, Elliot, for coming in. Thank you, Ed. Really appreciate it. Thank you for everything you're doing. And Amy, always a pleasure to hear you and now to engage with you directly. And good luck with all your work as well. Thank you.
43:52Ed Crooks:Thanks so much, Elliot.
43:53Amy Myers Jaffe:Absolutely. Thank you, Amy, very much for joining us. I know we'll be talking again very soon. Thanks to our producers, Stuart Duffy, Toby Biggins-Gilchrist, and Dan Cottrell. And above all, many thanks to all of you for listening. We really do value your feedback, so please do keep that coming. and we'll be back soon with all the latest news and views on the future of energy. Until then, goodbye.
From the publisher
California is often described as the state where you can see the future of the US, and of the world. That has certainly been true in terms of some of the problems faced by the electricity grid. California has been grappling with the impact of wildfires and a big shift to renewable generation, and now faces the prospect of rising power demand from electrification and data centers.
In this episode, host Ed Crooks and regular guest Amy Myers Jaffe of NYU talk to Elliot Mainzer, President and CEO of the California Independent System Operator (CAISO), to dig into how the state is tackling those challenges.
California’s electricity prices have nearly doubled in eight years, rising to about 32 cents per kilowatt hour for residential customers. Affordability has become a political flashpoint, as it has in many other parts of the US, and other countries around the world. Elliot explains how CAISO is using reforms of transmission planning and interconnection queues to help “bend the cost curve” downwards.
The discussion also covers an important shift that is now under way in western power markets. Governor Gavin Newsom of California recently signed AB 825, advancing an independent regional governance structure for the emerging extended day-ahead market. Elliot outlines how implementing the new law could change reliability, capacity planning, and resource adequacy across 11 states.
Another pressure point is AI, and the data centers needed to support it. While large load growth in California is more modest than in some other states such as Texas or Virginia, the state still expects 2.3 gigawatts of new data center demand by 2030. Ed and Amy question how much flexibility these data centers can provide, whether price pressure is pushing hyperscalers elsewhere in the US, and how CAISO will manage the all-important issues around siting and grid integration.
The episode also dives into one of California’s most contentious debates: the role for distributed energy resources and virtual power plants. Elliot discusses what CAISO can see, what it can’t, and what needs to change for DERs to support affordability and reliability—while highlighting the remarkable performance of the state’s battery fleet in avoiding Flex Alerts for the past three summers.
Finally, the conversation looks ahead to California’s longer-term energy future. The state has set an ambitious energy goals, including sourcing all its electricity from zero-ccarbon generation by 2045. To achieve that, many gigawatts of new renewables are still required, and wide-area coordination across the western US will have to live up to its full potential. As Elliot puts it, managing this grid is challenging, but “the challenge is energizing.”
Stay tuned to The Energy Gang as we continue tracking the forces that are reshaping the power industry, from technology and finance to policy and climate.
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