MONDAY STUDY: A Power Market For Colorado

Energy Imbalance Market Options for Colorado

Christopher T M Clack, Aditya Choukulkar, Brianna Coté, Sarah A McKee, October 22, 2020 (Vibrant Clean Energy)

Executive Summary

The present study uses the WIS:dom®-P optimization model to investigate the energy imbalance market options available to Colorado and evaluate the benefits and costs of participating in each. The study also evaluates the impact of Colorado not joining any energy imbalance market and creating a state-wide Joint Dispatch Agreement (JDA) between all Colorado utilities and cooperatives. A unique component of the study is that it evaluates the benefits and costs over an evolving system from 2018 through 2040, rather than a single future year. The four scenarios considered in the analysis are:

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(1) Business as Usual (“BAU”): In this scenario Public Service Company of Colorado (PSCo), Black Hills Energy, Platte River Power Authority and Colorado Springs Utilities (JDA entities) as well as Intermountain Rural Electric Association and Holy Cross Energy join the Western Energy Imbalance Market (WEIM) operated by California Independent System Operator (CAISO) and members of the Tri-State cooperative (along with Basin Electric Power and the Western Area Power Administration) join the proposed Western Energy Imbalance Services (WEIS) market proposed by Southwest Power Pool (SPP).

(2) All utilities and cooperatives in Colorado join WEIM (“West”): In this scenario, all utilities and cooperatives within Colorado join the WEIM operated by CAISO.

(3) All utilities and cooperatives in Colorado join WEIS (“East”): In this scenario, all utilities and cooperatives within Colorado join the WEIS proposed by SPP.

(4) Colorado forms a state-wide JDA (“CO-JDA”): In this scenario, all utilities and cooperatives within Colorado sign a JDA and work together on sharing power and planning capacity expansion.

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WIS:dom®-P modeled the above four scenarios assuming optimal capacity expansion and economic dispatch, along with co-optimizing utility-scale generation with Distributed Energy Resources (DERs) – such as distributed solar (both rooftop and community solar), distributed storage (storage installed behind the 69-kV station) and demand side management (DSM). Transmission was allowed to grow in all scenarios.

Overall the study indicates that Colorado does better (in terms of retail rates, jobs, capacity, emissions) when it acts in a unified manner. Splitting the utilities and moving to different EIM structures provides the least benefit to Colorado and exposes the state to competition from resources both east and west that encumbers the local resource pool. Further, Colorado brings enormous additional benefits to the region that it joins.

The “BAU” does provide benefits to Colorado compared with 2018 metrics, but are the least of all the studied scenarios. In the “BAU” scenario, Colorado retail rates reduce by $27.62/MWh by 2040 compared to 2018 values. In addition, by 2040 carbon emissions drop by 70.66% compared to 2018 as a result of 62% of the generation coming from carbon free sources. The “BAU” scenario also creates 61,528 additional jobs in the electric sector.

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Results from the modeling show that the most beneficial scenario for Colorado retail customers is the “West” scenario, which results in the lowest retail rates driven by Colorado having access to a larger market to buy and sell energy and Colorado’s wind and solar resource better positioned to take advantage of this market. In this scenario, retail rates reduced by an additional 0.84 ¢/kWh (a 30% reduction) compared to the “BAU” scenario. This scenario also resulted in lower total system costs compared to “BAU” scenario (cumulative savings of $0.8 billion compared to “BAU” scenario), the highest jobs created in the state of Colorado (75,375 additional full-time jobs compared to 2018) while resulting in the highest reduction in emission across all species of pollutants (reduction of additional 35 million tons of CO2 compared to the “BAU” scenario). The emission reductions are driven by about 68.4% of the generation coming from carbon free energy sources (compared to 62% in the “BAU” scenario). In this scenario, Colorado deploys more wind (about 1,000 MW more wind compared to “BAU” scenario) and solar (about 500 MW more utility-scale solar compared to “BAU”) and more efficient utilization of these resources. Therefore, this scenario best positions Colorado to meet its renewable energy and emission reduction goals while reducing costs for consumers.

The “East” scenario also results in lower total system costs compared to the “BAU” scenario for the state of Colorado (cumulative savings of $1.2 billion compared to the “BAU” scenario). However, retail rates savings were lower than “West” scenario owing to having a smaller market compared to the WEIM as well as SPP having better wind resource than Colorado. In addition, higher transmission costs (upgrading DC ties) result in limited transmission growth that further hinder cost reductions. In the “East” scenario, retail rates reduced by an additional 0.69 ¢/kWh (a 25% reduction) compared to the “BAU” scenario. Emission reductions were also lower compared to the “West” scenario with CO2 emissions reduced by additional 25 million tons compared to the “BAU” scenario with 64.6% of the generation coming from carbon free sources. The “East” scenario produced slightly lower jobs compared to the “West” scenario with additional 72,242 full-time jobs compared to 2018.

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The “CO-JDA” scenario resulted in the lowest savings in retail rates compared to the “BAU” scenario with retail rates reduced by 0.35 ¢/kWh (a 12.7% reduction) compared to the “BAU” scenario. The reason for the lower retail rates savings is that in this scenario, the model attempts to make Colorado as self-sufficient as possible. This scenario had the lowest energy exchange with neighboring states compared to all scenarios. Thus, the model could not take advantage of selling excess energy to other regions when they need it. However, the “CO-JDA” scenario had the lowest system cost for the state of Colorado with cumulative savings of $1.91 billion compared to the “BAU” scenario. This scenario created 69,049 full-time jobs (fewer than the “West” or “East” scenarios, but more than the “BAU” scenario). It should be noted that this scenario still results in higher job creation and lower retail rates compared to the “BAU” scenario as the model takes advantage of the joint dispatch agreement among the utilities in Colorado to optimize energy sharing within the state. About 66.3% of the generation in the “CO-JDA” scenario came from carbon free energy sources.

The WIS:dom®-P technical documentation with detailed explanation of the model as well as details on creation of weather, climate and load datasets is available here.

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