The Bill That Could Connect California to Sun, Wind, and Savings Across the West

The fragmented balancing of electricity delivery throughout western states may get one step closer to becoming integrated next week. A bill in the California State Legislature, Assembly Bill (AB) 538 by Assembly Member Chris Holden, would start the transition toward a fully integrated western electricity grid. The integration of the western grid would enable California to work with its neighbors to boost renewable energy production, deliver reliable electricity, and reduce the costs of dispatching clean electricity for the entire western region. 

Why does this matter? 

The amount of power that runs through the West is enormous. One-fourth of the nation’s electricity flows through the western grid, a web of power lines that connects all or part of 14 western states, two Canadian provinces, and Northern Mexico. This grid is currently managed by 38 separate domains that oversee day-to-day grid operations. Having that many cooks in the kitchen makes it difficult to distribute clean electricity efficiently and affordably while ensuring people have power during severe weather and other emergencies.

With this fragmented management of such a huge, intertwining grid, excess time and money are spent on simply coordinating to make sure the lights stay on. If we had a more integrated regional grid with a central operator, the cost associated with keeping this puzzle together would significantly decrease.

What are the benefits of a regionalized grid? 

The integration of the western grid would offer substantial economic, environmental, and reliability benefits to customers across 11 states in the western region, including Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming. While each state in the west has varying energy resources mixes, population densities, electricity demand levels, and many more unique qualities, the benefits of an integrated western grid would not be exactly evenly distributed across all states, but each state would see positive benefits.

Saves money

If the western grid can be integrated under one operator, then California and its neighbors can more easily buy and sell clean energy with each other. To that effect, the rich geographic and resource diversity of the region will increase the availability of clean energy options. With the ability to cooperate in this way, the best and cheapest electricity—which is increasingly from renewable resources—can be efficiently dispatched across the region. This coordination, as well as the optimization of the management of electricity transfers, would save the region billions of dollars per year, and that’s the low-end estimate! 

Another current economic inefficiency that grid integration can ease is the process of transferring electricity beyond a local area, often crossing two or more of the 38 domains in the west. Each time electricity crosses one of these “balancing areas,” a transmission charge is added onto the final cost. This causes unnecessary costs to pile up when dispatching the west’s diverse and abundant renewable resources. These superfluous transmission charges alone cost California consumers nearly $600 million each year; costs that would be avoided if the western grid were integrated.

Keeps the lights on

Beyond the everyday energy balancing that grid integration provides is the importance of regional coordination in the face of climate-induced events—extreme heat, winter storms, and more—that directly threaten the ability of our grid to deliver power when we need it the most. The heat wave of September 2022 served as both a wake-up call to the limitations of the current grid and an inspirational example of what regionwide cooperation can deliver when mobilized. In the end, blackouts were avoided, thanks to intense and creative, but last-minute, engagement spanning the multistate electricity sector, from California and Oregon to Idaho and Wyoming. However, this sort of eleventh-hour strategy could be avoided under an integrated western grid that would allow for resource sharing that is planned in advance.

Cuts carbon emissions and increases renewable energy

Many western states and utilities have some of the strongest and most ambitious clean energy goals on a rapid timeline. While the West will be able to achieve many near-term clean energy targets, the current disjointed grid greatly inhibits our ability to share excess clean energy and integrate more renewable energy resources, limiting our ability to meet long-term policy targets. For example, wind and solar generation are growing faster than the West’s inefficiently managed electric grid can put them to use. This is a triumph in our goals to accelerate the clean energy transition and decarbonize the electricity sector. But because we are able to generate more solar power and more wind power than we can use during some periods, and the western grid is patchworked, states like California are forced to throw away renewable electricity during certain periods.

Additionally, a coordinated western grid that stretches across the West will facilitate resource sharing, from significant wind power in the North and Intermountain West to solar in the Southwest to hydro in the Pacific Northwest. Integration can accelerate the transition from economically inefficient resources to new, economically efficient resources. Today in the United States, renewable energy prices are cheaper than traditional fossil fuel resources and plummeting further. With this trend, and with enhanced coordination, renewables will continue to make up more of the resource generation mix in the western region, reducing the need to turn on fossil-fueled power plants.

Provides transparent decision-making

It’s important for customers and stakeholders to have a clear window into the decisions being made regarding the flow of electricity they ultimately use, as well as a clear and barrier-free path to participating in the decision-making process should they want to. An integrated western grid has the potential to provide greater transparency regarding prices, emissions, and transmission use, as well as increased options for stakeholder participation, compared to the status quo across the West. Advocates of western grid integration are committed to continue working for accountability and public participation that is accessible to those who would be impacted as California plans for full grid integration and to ensure any existing barriers to participation are not exacerbated.

Why is legislation needed?

Achieving a fully integrated western grid is a real possibility on the horizon with a recently introduced bill in the California State Legislature that would allow California to coordinate with other western states and move toward more efficient grid management. This effort is a crucial tool in our climate crisis–fighting tool belt to complement the broad array of clean energy activities that California and other states in the West are relying on to fully decarbonize the western electricity grid.

For California to reap the economic, clean energy, and reliability benefits of regional coordination, it first needs to change its law and open the door for coordinated planning rather than isolated management. This bill would authorize the transition from the current fragmented structure to a fully integrated western power grid; authority that needs to be granted through a change in California law. What this means is that the California Independent System Operator (CAISO)—the entity that manages the flow of electricity to keep the lights on for the majority of California—would be empowered to oversee the flow of electricity, as well as to facilitate efficient and cost-effective transmission planning, across the West, rather than be limited to the boundaries of the state of California. This new structure would be called a multistate Regional Transmission Organization (RTO). The bill would also transition the CAISO board members to be fully independent and selected based on their expertise, rather than political appointees, to further ensure fair accountability to all customers within the expanded RTO. 

What progress has been made?

While the western electricity grid remains fragmented, there are some efforts underway that have helped the region progress toward full integration.

In 2014, the CAISO implemented a program called the Western Energy Imbalance Market (WEIM) that allows entities across the western region to buy and sell power at a low cost to meet real-time electricity needs, which is why it’s called a “real-time market.” With 22 participating entities across 11 western states, the WEIM has provided more than $3.4 billion in benefits, as well as cut more than 750,000 tons of carbon pollution throughout the region, by providing a central market where utilities can pool their resources and access a broader range of renewable resources to meet demand. However, since the WEIM only allows utilities to purchase and transfer electricity during limited time intervals, the economic benefits and decarbonization efforts are also limited. 

There is also a proposal from the CAISO that would build on the success of the WEIM to bring even more savings and reliability to the region. CAISO’s Extended Day-Ahead Market (EDAM) would allow participating utilities to buy and sell power the day before it will be delivered to customers, as opposed to the WEIM that only offers real-time transactions. The proposed EDAM, which will likely start operating in 2025, would increase regional coordination beyond the WEIM, encourage the development of renewable energy resources, and lower costs for consumers. It is estimated that the EDAM would create more than a billion dollars of annual savings for California and other western states. The EDAM is an important and significant next step forward on the path toward a fully integrated western grid that is transparent and accessible and has meaningfully representative governance. 

While the day-ahead market will be great progress on coordination, a fully integrated western grid would further maximize those benefits and help states reach their clean energy goals. It would accomplish this by setting up regional cooperation to deliver the best and cheapest renewable energy throughout the region, ease the integration of more renewable resources, improve transmission planning across the region, and enhance reliability by expanding power resource options for all participants.

Why now?

With the increasing threats to the grid, due to severe weather and other climate change–induced events rising in severity and frequency, it is vital to hasten the integration of the western grid to avoid a strained grid or even blackouts.

There is also significant momentum surrounding the concept of regionalization across the West. There are several states in the West that are now actively engaged in the conversation or have passed laws mandating their utilities join an RTO. With this momentum, the western states outside of California are weighing their options for grid integration and will work to organize the western grid with or without California. However, if the West organizes without California, the entire region will miss out on hundreds of millions of dollars in potential benefits, as well as the full potential for coordinating and utilizing renewable resources.

Are there more opportunities to engage?

The upcoming vote next week is the first step in a multi-month process at the California State Legislature. The bill still has a ways to go in its journey: It first has to pass the state assembly and then the state senate. If this bill passes through the legislature and is signed by the governor, there will also be a comprehensive and public process to create, approve, and implement the independent governance structure. The CAISO will create a governance proposal that must then be reviewed by the California Energy Commission, California State Legislature, and the governor to ensure that it meets standards of transparency, accountability, and respect for state authority.

The passage of this bill also does not automatically transform CAISO into an RTO to manage electricity supply and transmission across the entire West. Each individual entity in the West will have the choice to join the western RTO by submitting an application.

What are the next steps?

Even though this bill is only the start of a long process to integrate the western grid, it is a journey worth taking. There are multiple steps in the legislative process, during which time we expect broad stakeholder review, engagement, and input into the final language. While NRDC supports this bill for the reasons outlined above, we will continue to meet and discuss possible refinements with partners and all stakeholders. 

In sum, NRDC supports this bill as a critical component of our larger efforts to improve reliability, affordability, and cleaner power sources. It’s an important step in the right direction and, if done well, can support broader efforts in the West to spur clean energy development and combat climate change.