When the California Independent System Operator (CAISO) released its original Proposed Principles of Governance for a regional independent system operator (ISO), it included a proposal for the development of a methodology to track and account for emissions that are attributable to California load and resources located in California and out-of state resources serving California load.  I previously wrote about this document to provide an overview and background information.  The revised Proposed Principles of Governance omitted Principle 2 regarding Greenhouse Gas (GHG) accounting but emphasized that such a system remains a priority for the CAISO and necessary piece to an expanded regional ISO.

Specifically, the second bullet of the original proposed Principle 2 stated:

“To accommodate a regional balancing authority area spanning multiple states, the ISO will need to develop a transparent methodology for tracking and accounting for greenhouse gas emissions, which must include a means to identify such emissions that are attributable to California load and resources located in California and out-of-state resources serving California load.”

I will examine exactly what that could entail and lay out some of the issues of creating a system in a multi-state ISO where no other potential participating state regulates GHGs.

To accurately picture an electric grid, one needs to understand the basic physics of electricity.  Electrons do not behave like drops of water flowing through a pipe.  Electrons oscillate in place while energy is transmitted through the propagation of electromagnetic waves. Electricity cannot be dispatched from one particular place to another; consumers draw undifferentiated energy from the electric grid that becomes energized when energy flows on to that grid.  This means that the actual flow of power is unpredictable, uncontrollable, and untraceable because an energized grid is an undifferentiated electromagnetic wave that makes tracing the actual flow of electric power from a generator to a local distribution substation impossible.

Tracing of emission attributes from specific generation units to serve specific load instead would require an accounting system that tracks and assigns the emission attributes to the causal load.   At least two of these types of systems exist in wholesale energy markets but do not necessarily operate with the same purpose as the proposed CAISO regional governance principle: (1) PJM’s Generation Attribute Tracking System ; and (2) ISO New England’s NEPOOL Generation Information System (GIS).

PJM’s Generation Attribute Tracking System operates much like the Western Renewable Energy Generation Information (WREGIS) system.  Both systems track renewable energy generation from units that register in the system by using verifiable data and creating renewable energy certificates (REC) for state Renewable Portfolio Standard (RPS) compliance.  ISO New England’s Generation Information System provides emission attributes by fuel source “to issue and track[] certificates for all MWh of generation and load produced in the ISO New England control area, as well as imported MWh from adjacent control areas. In addition to the generation, the NEPOOL GIS provides emissions labeling for the New England load serving entities by tracking the emissions attributes for generators in the region.” The GIS uses proxies for all imported power and actual emissions for generation in its control area but these proxies are not used for Regional Greenhouse Gas Initiative (RGGI) compliance because each state tracks emissions generated in-state. Because the GIS operates a tracking mechanism through its emission labeling, it represents a replicable example of an emission tracking methodology that accounts for GHGs in a multi-state transmission system.

The major difference between the ISO New England’s system and the CAISO is that the states that compose ISO New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont) are part of the RGGI.  Delaware and Maryland (PJM) and New York (NYISO) round out the RGGI. While RGGI does not track emissions from out-of-state imports because it regulates the specific emission source in each state, the GIS still tracks imports and exports to assign emission attributes accordingly. Because there is no multi-state agreement that regulates GHG emissions in the west, there is no similar reason to create a tracking mechanism beyond California’s current Cap-and-Trade requirements.  Consequently, timing may become the defining factor with regards to the development and implementation of a western tracking system.

Creation of a methodology during the transitional period will depend on whether a consensus exists between regional stakeholders and state regulators that will compose the transitional committee described in Principle 3 (formerly Principle 4).   It appears possible to create a tracking system for cap-and-trade compliance system in a way that adheres to Federal Power Act Section 205 requirements (following in the footsteps of the GHG adder in the Energy Imbalance Market), avoids confidentiality issues, and ensures that non-participating areas do not shoulder the cost of administering a tracking system for California.  However, this does not mean that such a system will come to fruition from a regionalized transition process.

If a tracking mechanism is created, then California will have a clearer idea of the emissions associated with its loads.  This is because more of the power consumed in California will become traceable to specific generation sources under either:

(1) an auditable contract trail or equivalent, such as a tradable commodity system, that provides commercial verification that the electricity source claimed has been sold once and only once to a retail consumer making such transactions “specific purchase” under California Public Utilities Code Section 398.2(c) for power disclosure; or

(2) as a facility or unit which is permitted to be claimed as the source of electricity delivered. The reporting entity must have either full or partial ownership in the facility /unit or a written power contract as defined in MRR section 95102(a) to procure electricity generated by that facility/unit. Specified facilities /units include cogeneration systems. Specified source also means electricity procured from an asset-controlling supplier recognized by ARB making it a specified source under 17 CCR Section 95802(a)(354) for Cap-and-Trade.

This will have implications for GHG inventories, climate policies, climate action plans, and consequent mitigation and adaptation across California.  It will also allow for evaluation of electric demand, net electricity imports, electricity generated from multiple categories of generation sources, and CO₂ emissions from these sources as well as efficiency and demand-side management programs.

What is clear is that a tracking mechanism can be created and implemented.  What remains to be seen is whether such a system will survive the transition to a regional ISO, if a regional ISO does in fact occur.