What the U.S. Energy Market Can Learn From California

Wednesday, September 28, 2016 1:30 pm EDT



Kevin Yates, President, Siemens Energy Management

As Seen on Environmental LeaderTuesday, September 27, 2016

In California, there is no question that the state has the accelerator pressed down to the floor when it comes to clean energy. The latest evidence of that came just last month, when the Golden State became the first in the nation to propose its own plan for Clean Power Plan compliance.

A summit hosted this month by IHS in San Francisco brought together regional energy leaders to discuss how California can be a model for the rest of the country.

It’s clear that not every state will have the same approach. But there are common forces driving a lower carbon future, such as the low cost of fuel-efficient natural gas, more affordable wind and solar, aging infrastructure, and a more environmentally conscious society. These trends are ultimately pushing every state to a very similar place. It’s a landscape where you have a lot of new assets on the grid, where you have smart grid deployment, and where this new grid is incorporating a lot of the independent, distributed power infrastructure that’s starting to come online today.

What makes California stand out is its state-specific approach to CO2 reduction, evidenced by its robust cap-and-trade efforts and renewable generation growth over the past 15 years, combined with a focus outside its borders.

For example, there’s been a lot of movement in California on what is called the Energy Imbalance Market (EIM). Launched in November 2014 by the California Independent System Operator, the market allows utilities across a broad footprint to automatically exchange and share energy resources like renewables. Currently, the EIM is operating across seven states, has realized benefits of nearly $88 million as of this past July, and has saved nearly 68,000 metric tons of carbon emissions just this past spring. That’s the equivalent of taking over 14,000 cars off the road this year.

But, sharing energy efficiently, especially intermittent renewable generation, isn’t easy. It requires a real-time view into power demand and supply so states, including California, can determine the lowest-cost generation that will meet the market’s needs. Software is key to making this smart management a reality. And we think, ultimately, it is technology – and especially software – that is now going to enable a smarter grid, successful regional approaches, and greater carbon reduction.

From California, we learn that a state specific plan that also looks beyond its borders can serve as a model for other states and regions to follow in order to have a significant impact on emission reduction.

It’s clear that California has given us an opportunity as an industry to tackle many of the challenges facing our power systems. From microgrids that can go in complete island modes during a storm in Northern California, to more secure renewable power in light of nuclear retirements in San Diego, there are many ways in which the state is leading the way.

As California continues building out a lower carbon grid, we know that there isn’t one entity that will hold the key. It is going to take collaboration. Collaboration across industries, power providers, technology partners, and even states.