Tapas Peshin, a senior product manager at PCI Energy Solutions, has highlighted some interesting developments in the California Independent System Operator’s (CAISO) Extended Day-Ahead Market (EDAM). Just a month after its launch, it appears that PacifiCorp’s eastern and western systems are functioning almost like separate power markets.
In May, the average price for energy in PacifiCorp East was just $8.62 per megawatt-hour (MWh). In contrast, PacifiCorp West’s average was significantly higher at $18.97 per MWh. Moreover, PacifiCorp East saw negative prices in 17% of the hours, while PacifiCorp West only experienced this 2% of the time. These differences showcase the varying resource mixes and market dynamics between the two regions.
One Utility, Two Pricing Systems
PacifiCorp operates with two main regions: East, primarily serving Utah and Wyoming, and West, centered in Oregon. The eastern region, known as PACE, has more than double the load compared to PACW (the western region). In May, PACE’s day-ahead schedule handled around 5,600 MW, peaking near 7,650 MW, while PACW peaked at about 2,830 MW. More than size, the resource mix has had a notable impact on price signals.
Throughout May, PACE’s day-ahead energy prices averaged only $8.62/MWh, compared to $18.97/MWh for PACW. Much of this discrepancy is linked to daily price patterns. For instance, PACE’s prices fell sharply during the day, dropping below zero in many afternoon hours—seventeen percent of all hours recorded negative prices, with a low of -$41.78/MWh. On the other hand, PACW went negative only in a few hours.
The difference is primarily due to the types of energy sources each region uses. PACE’s energy generation in May was about one-third coal and nearly half from wind and solar. This mix contributes to the deep price dips during sunny days. Conversely, PACW primarily relies on gas and hydro, leading to a more stable price structure.
Greenhouse Gas Pricing Dynamics
One notable aspect of EDAM is its approach to pricing greenhouse gas (GHG) emissions. In California’s regulated market, CAISO adds a marginal GHG cost to local prices. In May, this cost averaged about $2.28/MWh, mainly during nighttime. During midday, when California was generating excess solar energy, the GHG component effectively dropped to zero.
This offers insight into how the carbon-regulated area interacts with different market participants. For instance, Valley Electric Association from Nevada, not subject to California’s GHG regulations, saw an average price of $10.70/MWh, significantly lower than PG&E’s hub price at $19.22/MWh.
A Smooth Launch and New Products
EDAM was introduced alongside enhancements to the Day-Ahead Market, which include new products like Imbalance Reserve and Reliability Capacity. These products are meant to address day-ahead and real-time uncertainties. May saw almost no significant supply shortfalls, suggesting that the launch was successful and had minimal issues.
However, PACW’s market showed some volatility during certain days in early May, indicating areas for improvement as the market stabilizes.
Looking Ahead
PacifiCorp won’t remain the only participant in this market for long. Portland General Electric is expected to join later this year, bringing a mix of gas and hydro resources that could enhance liquidity in the Pacific Northwest. More changes are on the horizon, including additional balancing authorities from California and New Mexico joining EDAM.
While the first month of operation doesn’t settle all questions about long-term market dynamics, it provides initial insights. The introduction of various balancing authorities into a shared framework may reveal deeper differences in pricing and economic conditions across the West. As more players join, these differences could become increasingly significant.