Attending the recent 10-year anniversary conference of the California Community Choice Association (CalCCA) in Sacramento was an eye-opener. The energy in the room (pardon the pun) was palpable. One theme rang out loud and clear: CCAs love local generation. But it raises a troubling paradox: If everyone loves local clean energy, why is front-of-the-meter (FTM) local generation nearly dead in California?
The answer lies in a systemic disconnect between the laws of physics and regulatory paperwork. Obsolete formulas and outdated software are costing California ratepayers billions of dollars.
Here is an example of the problem: A local utility substation (60 kV / 21 kV) has a 10 MW total load distributed evenly across two distribution pathways. Each circuit is rated to draw 5 MW of power from the grid, respectively. I’ll name the two circuits C1 and C2. Now, a generation developer builds a 4 MW FTM generator that interconnects directly on C1. That changes the physics of the local grid:
- C1’s net power drawn from the substation drops from 5 MW to 1 MW because of the 4 MW generator
- C2 continues to draw its standard 5 MW
- The entire substation now only needs to pull 6 MW of total imports from the high-voltage 60 kV bulk transmission system.
The demand forecast by the California Energy Commission (CEC) in its official 15-year Integrated Energy Policy Report (IEPR) completely ignores this 4 MW physical adjustment. Because the generator sits independently on the circuit rather than behind the meter (i.e., on a customer’s roof), the state’s forecasting software treats it as if the 4 MW FTM generator does not exist!
Consider the following open issues:
- One of the reasons why FTM generation can never secure deliverability status from CAISO is because when an FTM developer applies for deliverability, CAISO’s transmission-level models assume the project’s power must flow backward onto the bulk transmission grid because, on paper, the local load reduction doesn’t exist. Since the bulk transmission grid is heavily congested, the project is denied deliverability, stripped of its RA value, and rendered economically dead.
- The physical reality is simple: the electrons are instantly absorbed by neighborhood homes down the street. But under California’s current regulatory framework, if a project doesn’t exist on paper, it cannot survive in the real world.
According to the California Public Utility Commission (CPUC) Energy Storage Procurement Study conducted in mid-2023, the FTM distribution (non-customer-sited assets) actively connected to the distribution grid was 544 MW with a potential to grow over the next decade from 3,000 MW to 5,000 MW. The 544 MW FTM means to meet that level of demand that a 17% Planning Reserve Margin (PRM) required for system reliability must be added to the capacity making the total 630 MW.
Because the CEC’s demand forecast ignores these assets as load modifiers, the state’s long-term peak demand forecast artificially inflates the capacity requirement by over half a gigawatt.
California load-serving entities must procure a redundant 630 MW of supply just to satisfy a hard-wired accounting formula.
In response, the CEC has committed to coordinating with the CPUC and CAISO to establish formal eligibility protocols. Under the proposed guidelines, a local FTM project can finally claim official “load modifier” status if it satisfies four strict operational criteria that are under development.
Lacking any change to the FTM accounting status quo, the current paradigm drives up Resource Adequacy (RA) prices across the board. A recent comprehensive assessment by Aurora Energy Research evaluated this exact bottleneck. It concluded that integrating a target of 5.4 GW of local FTM assets into the demand forecast would eliminate the need for redundant utility-scale builds and save California ratepayers $6.5 billion over 20 years ($4.6 billion in avoided RA procurement alone).