In recent years, regional and state entities in the West have been exploring ways to improve the reliability of the electricity grid and address some of the challenges associated with the expansion of renewable energy resources.  One approach that has been discussed in many forums is an energy imbalance market (EIM). This paper analyzes the decision and stakeholder process used by the California Independent System Operator to create an innovative policy mechanism that will provide EIM services to entities outside of its jurisdiction. 

Because electricity cannot be stored efficiently on a large scale, electricity generation is typically controlled to meet demand. A balancing authority, such as the California Independent System Operator, is an entity responsible for balancing electricity generation with customer demand in real time. Because, electricity from resources that are variable, such as wind and solar, is more difficult to schedule, these resources make it more challenging to balance the system. An EIM would allow electricity dispatch across a larger geographic region, thereby creating more opportunities to balance load and generation. An EIM would also introduce market mechanisms that could potentially increase efficiency and flexibility.

The study provides insight into 1) the role of California ISO in the design and development of an innovative approach to a controversial jurisdictional issue; 2) the structures for stakeholder engagement that defined the spaces for formal and informal decision-making; and 3) the way the stakeholder process was used to limit the scope of conversation, explore technical expertise, and promote the energy imbalance market initiative.  The research suggests that California ISO was able to provide innovative leadership and foster collaboration, but that the outcomes are only partially determined by formal stakeholder interactions.  Based on the finding from the case study, two important questions are identified for further study:  What informal interactions influence decision-making and outcomes? And, what effect do these interactions have on accountability and legitimacy of public institutions?