The world of energy is becoming increasingly frenetic. Our world runs on electricity from various sources including hydropower, natural gas, solar, wind, nuclear, and coal. When you think about all the necessary parts—all the new ways of procuring and distributing energy to a vast and growing population—it’s astonishing that our nation has such reliable electricity. Yet almost 330 million people have the luxury of simply flipping a switch and, viola, the power is there. It almost seems like magic.
Of course, it’s not magic. It’s a finely tuned, extremely complex system—one that, for most people, operates beyond their line of vision, so they don’t even know it’s there. What do Independent System Operators (ISOs) bring to the system? Balance and efficiency. And ISOs are becoming a valuable resource to the successful operation of our energy system.
What is an ISO?
An ISO is defined as an “independent and federally regulated entity that coordinates regional transmission to ensure non-discriminatory access to the electric grid and a reliable electricity system.” ISOs were formed after the Federal Energy Regulatory Commission (FERC) issued orders to encourage utilities to work together to provide non-discriminatory access to their transmission lines.
Why use an ISO?
When an ISO is established, it coordinates, controls, and monitors the operation of the electrical power system—usually within a single US state, but sometimes across multiple states. This lifts a lot of the burden from utility companies themselves, who can struggle to account for the mercurial supply and demand of their markets.
ISOs essentially dole out the energy when and where it’s needed, accounting for a community’s energy needs. These needs can change swiftly, month to month, day to day, even hour to hour. Because ISOs can accurately meet the specific energy needs of an area to the hour, they significantly reduce energy waste.
One of the biggest ISOs we see is the California Independent System Operator (CAISO). Because of high demand, California imports more electricity than any other state. It was therefore the first state to restructure its electricity market in this way. CAISO oversees the operation of California’s bulk electric power system, transmission lines, and electricity market generated by member utilities. Since 1998, CAISO has been operating an electric system that now serves over 30 million people, while overseeing a wholesale energy market that generates $9 billion annually. As one of the largest and fastest growing ISOs in the nation, CAISO offers us a great glimpse into the future of the energy industry in the US.
Where we’re headed
We predict many utilities will continue to join forces with ISOs in the coming years. ISOs allow utility companies to get the most money possible for their product while simultaneously providing smooth, even access to power for communities. It’s a true win-win, and a great example of how the industries and markets that sustain our country are often much more complex than they seem on the surface.
From the proliferation and success of ISOs we can learn a lesson that can be applied far beyond the energy industry: No single entity can handle a vastly complex system alone; to keep everything running smoothly takes insight, innovation, and careful collaboration in unexpected ways.