Regional integration of California’s electricity markets and greenhouse gas compliance

Danny Cullenward submitted a formal comment letter to the California Independent System Operator (CAISO) to share his perspective on the relationship between California’s evolving climate policy portfolio and the critical market design questions reviewed in the CAISO Issue Paper, “Regional Integration California Greenhouse Gas Compliance Issue Paper” (August 26, 2016).

Today I am writing to share my perspective on the relationship between California’s evolving climate policy portfolio and the critical market design questions reviewed in the CAISO Issue Paper. My comments focus on two specific issues:

• Successful CAISO regionalization depends on California developing a legally robust post-2020 carbon pricing policy. I urge stakeholders to independently assess whether California already has the necessary authority to maintain a carbon price from its cap-and-trade market after 2020, and if not, what would be required to create this authority in light of Proposition 26’s constraints.

• The legal and policy risks of regionalization will vary on the basis of critical market design details, and therefore future stakeholder discussions would benefit from more specific proposals. Ideally, future proposals will include specific mechanisms for integrating state carbon pricing into wholesale market structures, the relationship between the market mechanism and state climate policy accounting, and the relationship between these two issues and regional governance structures. Given the heterogeneous views on climate policy across the western grid, it will be important for the governance requirements to operate in harmony with the proposed market mechanisms.

Disclaimer: I am writing in my personal capacity only, not on behalf of my employer, affiliates, or any other organizations.