The lack of a long-term capacity market—as a carryover from the central generation planning function performed by vertically integrated utilities (IOUs) prior to restructuring has been and continues to be a fundamental flaw in the market design structure to this day.
As operators, we knew one reality “when it got hot in California, the California on-shore wind stopped blowing, the imports dwindled, in-state natural gas fired plants get derated and–if the peak is after sundown, fasten your seatbelt”. Let us review history for the purpose of preventing the mistakes of the past.
- Repeated pleas from the ISO to include bulk energy storage and pumped hydro storage in the CPUC’s procurement proceedings went nowhere. In 2016, and ISO CEO drafted a letter to the CPUC along with detailed analysis on the benefits of long-duration storage in Southern California was widely circulated and communicated but was met with no action and continued delays. ISO BulkEnergyStorageResource-2015-2016 Special Study Update (http://www.caiso.com/Documents/BulkEnergyStorageResource-2015-2016SpecialStudyUpdatedfrom40to50Percent.pdf).
- The amounts of solar capacity counted toward the August 2016 peak, set by the regulators, ranged between 77% of nameplate capacity in 2013 to 94% in 2016 for solar resources. This is completely unrealistic and nonsensical. In 2018, The regulators revised the capacity accounting amounts for solar resources from 94% to 41%–still completely unrealistic.
- How is it conceivable to assume 77% or 94% or even 41% of intermittent resource nameplate capacity would be available for four hours at the peak where the product itself is intermittent? And the peak is in the evening? No sun!!
This “inconvenient truth” was revealed starkly in 2019. Based on the new capacity calculations, on August 12, 2019, the ISO filed comments (http://www.caiso.com/Documents/Aug12-2019-ReplyComments-PotentialReliabilityIssues-IRP-R16-02-007.pdf) to the PUC stating the bleak reality “… operational deficiency reaching maximums of 2,300 MW, 4,400 MW, and 4,700 MW in 2020, 2021, and 2022, respectively.” To make matters worse, a relatively new 1,124 MW La Paloma natural gas fired plant’s viability was threatened and subsequently mothballed due to the lack of a viable revenue stream highlighted by the absence of a capacity market or Resource Adequacy contract. After repeated pleas by the plant owners to the State regulators, ISO and even a 206 filing with FERC, federal and state regulators determined that this plant that was “not needed” for reliability. The ISO urged FERC to deny the plant’s request based on the regrettable notion that the ISO had no jurisdiction over Resource Adequacy procurement and there are no reliability issues. The plant was shuttered in 2018-2019. Had the ISO, state and federal regulators recognized the deficiencies in reliable capacity, this plant and possibly others could have saved the day and saved California ratepayers billions of dollars and prevented the recent hysteria of requesting peaking capacity for summer 2021 and 2022.
The inconvenient truth is that the grid has been operated unreliability for years. These “94%, 77% and even 41%” firm capacity assumptions are built on a house of cards; and the cards will fall, it is just a question of when and how many. The current planning assumptions simply do not match operational realities. We have already seen this fundamental contradiction come home to roost in the form of capacity shortages which were predicted and well known to grid operators and others but, sadly, has been ignored by regulators and policy makers. The misalignment of the CPUC Portfolio and CAISO Transmission Planning continue to create false economic and misleading reliability.
Until regulators, the ISO and policymakers get on the same page and recognize that they cannot “wish into existence” unreliable intermittent capacity, California will continue to foster a fictitious and false sense of reliability. The state needs more robust long-term planning—for integrated transparent generation and transmission resources, and with the use of physically, factually and electrically solid assumptions.
Published Feb 20, 2022, to the Western Power Trading Forum’s “The Friday Burrito”
