It’s time for a serious overhaul

Prepared by By Ziad Alaywan, P.E.

Despite tremendous efforts taken by the ISO, State agencies and other stakeholders to prevent energy and capacity shortfalls like we saw in August 2020, the picture for summer 2021 looks particularly bleak if we see temperatures and load consumptions similar to 2015, 2017 and 2020.

The reliability responsibility continues to be a shared among the CPUC, CEC and the CAISO. And the summer outlook continues to be challenging. Despite the increase planning reserve margin from 15% to 20 percent in 2023 after the ISO identified a resource gap in the existing fleet that ranges from 450 MW to 3,300 MW from July through September 2021. However, in our business, by the time that reliability concerns raised in planning models manifest themselves in rotating outages, it is too late to develop well thought out projects to provide long-term mitigation. We are forced to resort to installing short-term emergency projects that most often are inconsistent with long-term policy objectives designed to de-carbonize the energy sector and for sure raises the cost to Ratepayers. The CEC energy forecast for a 1-in-2 scenario for 2020 was 44,740 MW. Adding 15% planning reserve margin (PRM), the CEC capacity forecast was equivalent to 51,413 MW. The actual ISO energy consumptions at 6:28 pm on August 14, 2020 prior to dropping 1,072 MW of firm load was 46,888 MW. However, the peak demand load s would have been 47,960 MW had the load not been. The difference between the forecast and actual was 3,220 MW or 7.2%, which is a hefty shortfall. On the capacity front, the 15% PRM August 2020 forecast was 6,711 MW above the energy forecast. The actual reserve needed to serve all load was 7,194 MW of 19%. Big difference. The CEC 2021 adjusted energy forecast peak is to 45,775 MW (1 in 2) and, 47,723 MW (1 in 5). All of this mean that there is 20% chance that California will face emergency conditions in 2021. I believe, everyone would agree that this level of reliability is unacceptable. Drought conditions are certainly adding to concerns, especially if there is a regional heatwave. Increasing PRM and canvassing the West for energy to be available this summer are dire steps. California needs a significant reform in how the grid reliability planning is done. The current patchwork planning between CAISO, /CPUC and CEC is prone to inefficiency, misaligning and, despite best efforts, is not working. Two surgical changes that may be helpful to revisit (1) institute an Organized Capacity Market and (2) reform the ISO transmission planning process so the to an ISO Planning process where ISO should be in charge of planning both resources and transmission, with an eye toward providing an overall lower cost solution to ratepayers while addressing reliability issues. This would avoid the current piecemeal approach where CPUC fixes the resource procurement target, and the ISO is left with planning on the margin while “holding the bag” If the CPUC and CEC Planning was off. Otherwise, at best, reliability will continue and be incrementally addressed and at a higher cost to ratepayers. Politics on the side. I would think the guys that operate the grid should be best suited to plan for the grid!!!

Published March 30, 2022, on the Western Power Trading Forum’s “The Friday Burrito”