Industry, ratepayer advocates push for cautious approach to California’s summer 2021 reliability preparation

Dive Brief:

  • Industry groups and ratepayer advocates in California are pushing for a cautious approach toward procuring new resources, as part of the state’s bid to prepare the electric system for summer 2021 and avoid a repeat of the rolling blackouts that occurred in August.
  • The California Public Utilities Commission (CPUC) opened a rulemaking in November aimed at addressing potential reliability challenges in 2021, and is considering a host of options including implementing efficiency upgrades to existing power plants. But in comments filed with the agency, some groups questioned the need for additional procurement.
  • A big concern is that the CPUC proceeding has jumped ahead to figuring out procurement for summer 2021 without better understanding the need, if any, for these resources, Mark Specht, energy analyst at the Union of Concerned Scientists, said in an email. “Without a clear understanding of the need, there’s a risk that the CPUC will require costly and unnecessary procurement, saddling ratepayers with these costs.”

    Dive Insight:

    The CPUC’s proceeding aims to increase energy supply as well as reduce demand prior to next summer. In addition to upgrades to existing power plants, the agency is considering re-contracting generation that would otherwise retire, and adding more storage to the system.

    The California Independent System Operator (CAISO) voiced support for these strategies in comments filed with the CPUC on Friday, asking regulators to ensure the new resources will be able to serve high loads around 8 p.m., after the sun has set, as well as be online before September 2021, which is when system resource needs are expected to peak.

    And Calpine Corp. said it has identified possible upgrades it could implement at its gas-fired generating facilities to increase available capacity on the grid without a corresponding increase in emissions.

    “Immediate direction from the Commission regarding the procurement strategy and cost recovery for these upgrades is critical,” Calpine said.

    But other parties advocated for a more cautious approach. The commission’s proposed strategies are targeted at a need that has not been clearly defined yet, according to Vote Solar, the Solar Energy Industries Association and the Large-Scale Solar Association.

    “[W]e are concerned that in a rush to meet this objective, progress in other Commission proceedings towards meeting the State’s greenhouse gas and renewable energy goals may be undermined,” the groups said in comments filed with the CPUC.

    California energy agencies’ preliminary analysis of the blackouts, as well as reporting from CAISO’s Department of Market Monitoring, suggest that a supply capacity shortage — that requires expedited procurement — wasn’t the problem, ratepayer advocacy group The Utility Reform Network said. TURN urged the commission to focus on the demand side of the issue prior to summer 2021, rather than navigating complex supply options like adding efficiency upgrades to power plants, which requires a long lead time.

    The commission should not use the proceeding to look into long-term contracting beyond 2021, Marcel Hawiger, staff attorney at TURN, said at a CPUC pre-hearing conference last week.

    “Frankly, this proceeding addressing [a] huge number of issues has the great potential to do more harm than good and the scope should be limited to actually implementing things that can be done in 2021,” he added.

    The CPUC’s Public Advocates Office also said that there might not be a need for additional procurement, and the commission should focus only on short-term contracts to meet demand in September 2021.

    While Pacific Gas & Electric (PG&E) broadly supported the proposals, the utility urged regulators to conduct additional analyses to get a better understanding of reliability needs in 2021. Without this, “it will be extremely challenging to identify the feasibility of actions that can be taken to address summer 2021 reliability concerns and whether the concerns are expected to persist through summer 2022,” the utility said.

    PG&E also raised safety-related concerns about the CPUC’s proposal to upgrade existing power plants and bring on more storage, both of which could require increasing the capacity of current interconnection agreements. That process generally includes either a 12 to 36 month study, or waivers from the Federal Energy Regulatory Commission.

    “Hastily adding capacity to the grid without proper study has the potential to undermine grid reliability, a result contrary to the purpose of this proceeding,” PG&E said.

    A key challenge facing the CPUC is timing. The agency is looking to get the new capacity online by June 1, 2021, and after factoring in permitting, environmental review and interconnection processes, it’s unlikely that resources that aren’t already in the middle of the development process would be able to meet that deadline, the Independent Energy Producers Association (IEPA) said.

    And while re-contracting existing generation is an option, most plants that might have been candidates for this have either already retired or secured contracts to continue operating, meaning “it’s unclear how many MW, if any, could be added through re-contracting,” IEPA said.

    Specht agreed that the tight timeline is a key challenge, especially given that it makes pretty much any procurement before next summer more expensive.

    “It’s unclear what new physical resources could feasibly be deployed before next summer, which is why resources like demand response are one of the most sensible solutions for addressing any procurement needs,” he added.