Episode Summary
Executive Summary: The episode examines renewed efforts to create a Western RTO/ISO to coordinate electricity markets and transmission planning across the western U.S. Stanford’s Michael Wara argues the case has changed since 2016-17: coal is less relevant, IRA labor rules narrow the union cost gap, and more western states now share clean-energy goals. The big remaining issues are governance, labor politics, reliability, and how California can cooperate regionally without losing control.
Main Topics: Why a Western RTO matters (Priority: 5/5): Wara explains how regional transmission organizations reduce costs and improve reliability by pooling reserves, coordinating planning, and enabling lower-cost power sharing across a larger footprint. California’s changed political and economic context (Priority: 5/5): Compared with the last major push, California now faces more urgent reliability needs and a much larger clean-buildout challenge, making regional cooperation more attractive—but also more politically fraught. Labor and union opposition (Priority: 5/5): Unions remain wary that a broader market could shift renewable construction jobs out of California, though IRA prevailing-wage/apprenticeship requirements have reduced the economic advantage of out-of-state buildout. Governance, sovereignty, and no capacity market (Priority: 5/5): A viable regional structure must give states real voice, preserve state control over resource adequacy, and avoid a capacity market, which California sees as politically and technically unacceptable. Halfway houses: EIM, EDAM, and WRAP (Priority: 4/5): California’s Energy Imbalance Market and planned enhanced day-ahead market are presented as incremental steps toward deeper integration, while the Western Resource Adequacy Program explores shared planning without full RTO governance. SPP as a competing Western market power (Priority: 4/5): The Southwest Power Pool’s western expansion and competing imbalance-market/service offerings could split the region into two frameworks and pressure California to move faster. Transmission buildout and reliability risk (Priority: 5/5): The conversation stresses that near-term transmission planning and new lines are urgent regardless of RTO timing, especially as wildfire risk, demand growth, and renewable integration strain the current system.
Key Arguments: A larger operating footprint lowers costs because electricity, reserves, and transmission can be shared across more geography. The EIM already proves that even limited regional sharing creates benefits and builds trust among participants. California’s old regionalization debate was shaped by 2017-era concerns; several of those concerns are weaker now because coal has declined and IRA labor rules change project economics. A Western RTO is unlikely to include every western state; the realistic goal is to recruit the most valuable and compatible partners, such as Bonneville-adjacent utilities and states with clean-energy ambitions. The absence of a capacity market is essential to preserving state sovereignty and preventing a repeat of politically contentious PJM-style conflicts. California’s biggest immediate challenge is not imports but its own permitting, interconnection, wildfire, and workforce constraints. SPP’s western expansion may create enough competitive pressure to force California to clarify and accelerate its own regionalization path. Even without a full RTO, California can pursue regional transmission lines and shared planning now to avoid waiting until the late 2020s. Reliability is the decisive political issue: a blackout crisis could trigger backlash against SB 100 and slow the clean-energy transition.
Data Points: Western U.S. states without a joint RTO: 11 - The western states mostly operate as isolated vertically integrated utility systems rather than within one regional market. California population share in the West: 40 million out of 100 million - Used to show why California is the largest potential buyer in any Western regional market. States in the West with 100% clean-energy goals: 6 - Wara notes that several western states now share California-style clean-energy targets. California RTO governance history: 2016-2017 - The last major regionalization push in California occurred during this period. IRA tax-credit labor requirement start: January 1st of next year - Wara says prevailing wage and apprenticeship rules will be required to get the full PTC. RTO implementation horizon: late 2020s at best - A new regionalization law would still require drafting, FERC review, and approval before implementation. Market price comparison: coal is a five-cent product in a three-cent market - Used to argue coal is increasingly uneconomic in competitive western power markets. Transmission line planning alternatives: California is already building lines to Wyoming - Illustrates how California can pursue regional access even before a formal RTO exists.
Pivotal Quotes: "What these ISOs or RTOs really create when they're done well is a free trade zone where electricity can be traded at very low cost." — Michael Wara: Explaining the core efficiency logic behind regional electricity markets. "The primary mission of an RTO or an ISO is to operate, right? It's to operate the electricity system in a particular geographic footprint." — Michael Wara: Defining why larger regional footprints can improve operational efficiency. "Coal is a five-cent product in a three-cent market." — Michael Wara: Arguing that coal’s economic and policy relevance has sharply diminished in the West.
Implications: Western grid integration is moving from abstract idea to live political contest. The likely path is incremental: expand EIM/EDAM, lock in governance protections, and build transmission now, while balancing labor, state sovereignty, and reliability concerns. If California delays, SPP may shape the region first.