California Energy: One Grid Under Too Many Assumptions

February 4, 2021 | 9:00 am
Antandrus at English Wikipedia
Adenike Adeyeye
Former Contributor

California’s energy grid is essentially a very complicated group project. Multiple regulatory bodies, including the California Public Utilities Commission (CPUC), California Energy Commission (CEC), and the California Independent System Operator (CAISO) have a role to play in how the grid functions. They develop and implement energy policy alongside public and investor-owned utilities, as well as NGOs, power generators, and other advocates who participate in public decision-making processes. All of these players have different responsibilities and different levels of authority. But much like a group project in school, California is much more likely to meet its goal of a reliable, decarbonized energy grid if everyone actually participates and collaborates.

That is why I was surprised to see CAISO approve a “reliability must run” or RMR designation without any stakeholder input and with new planning assumptions that differed from those typically used by CAISO and CPUC. An RMR designation is used to prevent the retirement of a power plant, so that it can be called on to meet future energy demand. In this case, the December 2020 RMR designation prevented the retirement of the 32-year-old Midway Sunset Cogen power plant in Kern County, a gas-fired power plant that is not consistent with the state’s efforts to decarbonize the energy grid and mitigate the effects of climate change.

In documents presented to the CAISO Board of Governors explaining the need for an RMR designation, CAISO asserted that a 20% planning reserve margin, as opposed to the existing 15% planning reserve margin, is needed to maintain a reliable energy grid. The planning reserve margin is the amount of extra capacity needed to make sure that there is almost always enough capacity available to meet demand, even on days when demand is unusually high. California’s current 15% planning reserve margin means that grid operators make sure that capacity on the grid exceeds forecasted energy demand by at least 15%.

Both the RMR designation and the increase to the planning reserve margin could complicate California’s efforts to fight climate change, so both should have received input from the other players in the tricky group project that is our energy grid.

August blackouts drove CAISO’s surprising unilateral action

To understand why CAISO took action before talking to stakeholders, we’ll need to look back at what happened this past August. As California and the rest of the West were sweating through an extreme heat wave, energy demand outstripped supply in the critical early evening hours, when solar production was diminishing but there was still strong consumer demand. This mismatch in production and demand has been an ongoing challenge since renewables became a bigger part of California’s energy mix, but it was amplified during the extreme heat wave. Due to a series of factors, grid operators were not able to access other resources and balance supply and demand. And on August 14 and 15, Californians experienced a few hours of rolling blackouts during those early evening hours.

To avoid future crises and blackouts, state agencies are working together to identify and address root causes. CAISO, CEC, and CPUC issued a Final Root Cause Analysis last month to explain some of the factors that contributed to the August blackouts. The Final Root Cause Analysis sets the stage for state agencies and CAISO to collaborate as they make changes to shore up the energy grid for what’s sure to be another hot summer. The Final Root Cause Analysis recognizes the need for swift action to address summer reliability concerns alongside the need for collaboration and stakeholder input. To quote CAISO, CEC, and CPUC leaders in the Final Root Cause Analysis, “implementation of these recommendations will involve processes within state agencies and the CAISO, partnership with the state Legislature, and collaboration and input from stakeholders within California and across the western United States.” CAISO’s surprising decision to enter into an RMR agreement with Midway Sunset Cogen without stakeholder input is a departure from the collaborative, participatory process that the Final Root Cause Analysis suggested.

Recent changes to RMR policy made this agreement possible

CAISO was able to make its unilateral decision to keep an aging power plant in service in part due to an October 2019 decision from the Federal Energy Regulatory Commission (FERC) that changed the rules around RMR agreements. CAISO’s RMR powers used to be limited to addressing local reliability needs. The FERC decision gave CAISO the power to use RMR to address system reliability needs as well.

As the FERC decision expanded CAISO’s power to protect grid reliability, it reduced FERC’s oversight over CAISO’s use of RMR agreements. Some at FERC saw this coming. FERC Commissioner Glick partially dissented from the decision because CAISO would not have to justify the need for RMR agreements to FERC and could keep the RMR agreements in place indefinitely. The FERC decision did not require CAISO to limit the agreements so that the aging plants would not keep running any longer than absolutely necessary. Now, CAISO can enter into RMR agreements with these power plants with no clear exit plan and without any other body reviewing and authorizing the RMR justification.

Given there is no external check on CAISO’s ability to keep fossil fuel resources online, it is even more important that CAISO engage in a robust stakeholder process before entering into RMR agreements. But in this case, they didn’t. And that has real implications for Californians. RMR designations allow older plants to continue to operate and emit carbon, despite the state’s efforts to decarbonize the energy grid. RMR designations should remain a last resort. Stakeholder input can help hold CAISO accountable to minimizing the use of RMR designations and prioritizing planning decisions that make RMR designations unnecessary.

This particular RMR designation introduced a new, higher planning reserve margin without any public vetting. This higher planning reserve margin suggests that utilities will need to buy more energy resources to make sure they can meet consumer demand. That costs money that ultimately California ratepayers will pay. And, if utilities meet that higher need with capacity from polluting gas-fired power plants, the additional carbon emissions will only set California back as decisionmakers work to reduce emissions and avoid the most tragic, terrifying impacts of climate change. Such a significant change should receive public review.

Hasty planning will not create a reliable grid

California’s energy grid needs reliability improvements, but overly rushed, reactive planning that bypasses all public review is not the answer. In crisis mode, it can be easy to forget that one of the causes of California’s energy grid challenges is extreme weather driven by climate change. Making hasty decisions to indefinitely prolong the life of gas-fired power plants could undermine California’s efforts to mitigate climate change. That could fuel even more drastic weather events.

California’s energy agencies are statutorily obligated to balance multiple important considerations as they plan for future energy needs. Through various pieces of legislation, such as SB 100 and SB 350, the California legislature requires that they prioritize safety, affordability, reliability, equity, and climate change mitigation as they manage and regulate the energy grid. Inviting stakeholder input helps to hold these agencies accountable and can help ensure that short-term reliability needs are met in ways that do not ignore California’s other priorities. CAISO and CPUC have both developed stakeholder processes regarding summer 2021 grid reliability, in case we face more extreme weather events and risks of blackouts. This RMR decision happened in December 2020 before CAISO began its stakeholder process.

CAISO recently proposed this same 20% planning reserve margin in initial comments submitted to the CPUC’s stakeholder process (or, as the CPUC calls it, a rulemaking). In subsequent expert testimony to the same CPUC rulemaking, CAISO slightly revised its proposal and now recommends a 17.5% planning reserve margin – another indication that it was premature to introduce the 20% planning reserve margin as a basis for CAISO’s RMR designation.

No one body should make unilateral decisions that change the underlying assumptions for grid planning. If a higher planning reserve margin is needed for grid reliability, it should be established in a public process that allows all relevant players to weigh in, so that we balance the many priorities that feed into maintaining a safe and reliable grid. We need cooperation by all players involved or else California faces another long, hot, frustrating summer.