California’s grid under pressure: affordability, AI, and the future of electricity markets

Dec 9, 2025

Elliot Mainzer, President and CEO of CAISO, shares insights on California's electricity grid challenges and strategies. He addresses skyrocketing electricity prices and how CAISO is reforming transmission planning to reduce costs. The conversation explores the implications of AB 825 for regional governance and its potential to enhance market reliability. Elliot also delves into the impact of rising data center demand on energy loads and the role of AI. He emphasizes the importance of integrating distributed energy resources to improve affordability for consumers.

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INSIGHT

Transmission Planning Cuts Costs

CAISO focuses on efficient, forward-looking transmission planning and queue reform to lower costs and speed resource onboarding.
Running an efficient Western energy imbalance market has delivered billions in production-cost savings and improved reliability.

ADVICE

Prioritize Low-Impact Projects

Prioritize projects that minimize grid impact and sit where transmission exists rather than first-come-first-served queueing.
Reward projects with commercial interest and smart siting to reduce study load and speed delivery.

ANECDOTE

Rapid Buildout Of Generation Capacity

CAISO onboarded 26,000 MW of new generation in five years, including 14,000 MW of four-hour batteries.
The system added 7,000 MW last year and continues robust annual onboarding.

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California is often described as the state where you can see the future of the US, and of the world. That has certainly been true in terms of some of the problems faced by the electricity grid. California has been grappling with the impact of wildfires and a big shift to renewable generation, and now faces the prospect of rising power demand from electrification and data centers.

In this episode, host Ed Crooks and regular guest Amy Myers Jaffe of NYU talk to Elliot Mainzer, President and CEO of the California Independent System Operator (CAISO), to dig into how the state is tackling those challenges.

California’s electricity prices have nearly doubled in eight years, rising to about 32 cents per kilowatt hour for residential customers. Affordability has become a political flashpoint, as it has in many other parts of the US, and other countries around the world. Elliot explains how CAISO is using reforms of transmission planning and interconnection queues to help “bend the cost curve” downwards.

The discussion also covers an important shift that is now under way in western power markets. Governor Gavin Newsom of California recently signed AB 825, advancing an independent regional governance structure for the emerging extended day-ahead market. Elliot outlines how implementing the new law could change reliability, capacity planning, and resource adequacy across 11 states.

Another pressure point is AI, and the data centers needed to support it. While large load growth in California is more modest than in some other states such as Texas or Virginia, the state still expects 2.3 gigawatts of new data center demand by 2030. Ed and Amy question how much flexibility these data centers can provide, whether price pressure is pushing hyperscalers elsewhere in the US, and how CAISO will manage the all-important issues around siting and grid integration.

The episode also dives into one of California’s most contentious debates: the role for distributed energy resources and virtual power plants. Elliot discusses what CAISO can see, what it can’t, and what needs to change for DERs to support affordability and reliability—while highlighting the remarkable performance of the state’s battery fleet in avoiding Flex Alerts for the past three summers.

Finally, the conversation looks ahead to California’s longer-term energy future. The state has set an ambitious energy goals, including sourcing all its electricity from zero-ccarbon generation by 2045. To achieve that, many gigawatts of new renewables are still required, and wide-area coordination across the western US will have to live up to its full potential. As Elliot puts it, managing this grid is challenging, but “the challenge is energizing.”

Stay tuned to The Energy Gang as we continue tracking the forces that are reshaping the power industry, from technology and finance to policy and climate.

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