Why Can’t California Shake Its Natural Gas Habit?

November 25, 2019 | 10:15 am
Gas plant in California with pipeline in foregroundJohn Ciccarelli/BLM
Mark Specht
Western States Energy Manager/Senior Analyst

California is a national leader in clean energy generation, but to fully transition away from fossil fuels in the electric sector, the state will need to expand its focus beyond energy and start taking a hard look at capacity.

California has a resource adequacy program, which ensures that the state has enough electricity generating capacity at the ready to keep the grid reliable year-round. Up until now, the data about the types of resources (natural gas plants, solar, energy storage, etc.) being used to satisfy those reliability requirements has not been publicly available. But at the urging of UCS and other organizations, that information is now being made public.

So now the numbers are in, and they paint a startling picture of California’s continued reliance on natural gas. After taking you through the numbers, I’ll talk about some of the solutions we already have and the ones we might still need.

Sit down, folks. This will take your (energy nerd) breath away.

Note: As with my last blog, the type of “reliability” I’m discussing here is a distinct kind that has very little to do with the reliability issues on the minds of most Californians today: Public Safety Power Shutoffs (PSPS), or intentional power shutoffs used to prevent wildfires. In this blog, reliability refers to having enough power, not the reliable transmission and distribution of electricity.

A first-of-its-kind report

The California Public Utilities Commission recently released a report documenting the current state of the resource adequacy market in California. For the very first time, the public received a comprehensive summary of the types of resources being used to meet both system and local resource adequacy requirements. (For a refresher on system and local resource adequacy, see my past blog.)

The results are discouraging, but they aren’t very surprising. Folks deep in the weeds of California’s resource adequacy program (e.g. yours truly) have known that California is still massively reliant on its fleet of natural gas power plants, and these numbers simply confirm something we all knew but couldn’t say without the numbers to back it up.

Takeaway #1: California leans heavily on natural gas for system resource adequacy, and even more so for local resource adequacy.

The report shows just how dependent California still is on natural gas power plants for reliability. Even though only 35% of California’s electricity generation in 2018 was from in-state natural gas power plants, 55% of California’s system resource adequacy was provided by in-state natural gas power plants during September 2019 (the month with the highest load forecast, and therefore the month with the highest system resource adequacy requirements). Furthermore, a shocking 71% of California’s local resource adequacy was provided by natural gas power plants in September 2019.

In other words, about a third of our energy is from natural gas throughout the year, but during the toughest grid conditions (i.e. peak demand periods) and local reliability events (e.g. transmission line or power plant outages), half to more than two-thirds of our power comes from natural gas. That’s a lot of fossil fuel dependence.

While California has made great strides towards generating more clean electricity, the state still relies heavily on natural gas for resource adequacy.
Note: Energy data is for 2018, and resource adequacy data is for September 2019. While the energy data distinguishes between small hydro (included in the renewables category) and large hydro (with its own category), the resource adequacy data lumps all hydro together. For both data sources, the “renewables” category also includes solar, wind, geothermal, and biomass. The “energy storage” category includes pumped hydro and battery storage.

Why is California so dependent on gas for resource adequacy?

It all boils down to the difference between energy and capacity. Renewables are great at producing low-cost energy, but providing capacity for resource adequacy requires the ability to generate energy when it’s needed most (i.e. during peak load). Since roughly one million rooftops in California now have solar panels that provide homes with energy while the sun is shining, California’s peak load has shifted further into the evening hours after the sun has set. As a result, newly installed renewables (especially solar) are less effective at producing energy when it’s needed most because the timing of that need has shifted. Ultimately, the amount of renewable capacity that counts towards California’s resource adequacy program ends up being a much smaller fraction than the percentage of the state’s energy produced by renewables. (I will explain this phenomenon in more detail in a future blog!)

Takeaway #2: California’s reliance on natural gas for system resource adequacy varies substantially by month.

Another interesting finding in this report is that California’s dependence on natural gas for system resource adequacy is much higher in some months than in others. For instance, while September 2019 saw 55% of the state’s system resource adequacy coming from gas, January 2019 had a whopping 71%!

California’s dependence on natural gas for reliability depends heavily on the month.
Note: Data is for 2019. The “renewables” category includes solar, wind, geothermal, and biomass. The “energy storage” category includes pumped hydro and battery storage.

The explanation for this difference is a bit more complicated. Essentially, the amount of gas capacity used to meet system resource adequacy requirements doesn’t change very much between September and January (only a ~10% decrease) but the capacity of other resource types drops dramatically, which increases natural gas’s share of the pie.

Which types of resources provide more capacity in the summer than the winter?

  • Wind and Solar, because in the dead of winter when the sun sets early and the wind doesn’t blow as strongly, solar and wind are even less able to provide energy when the grid needs it most.
  • Nuclear, because reactors must periodically shut down for maintenance and refueling, and this work is typically carried out in non-summer months.
  • Hydro, because there are all kinds of external limitations that affect how much hydropower can be produced. For example, agriculture, fish, and white-water rafting all determine how much water can be released at different times of year, which impacts the amount of hydropower generation.
  • Imports, not necessarily because they are less available, but because there are lower-cost options (e.g. in-state natural gas power plants).

So what does this mean? It means the big challenge for getting through the year using only clean electricity will be in the dead of winter, not the heat of summer. I know. I didn’t see that one coming either.

 Takeaway #3: Most local areas are extraordinarily dependent on natural gas for local resource adequacy, with one big exception.

The last thing I found fascinating about this report was that most local areas are massively dependent on natural gas power plants for local resource adequacy. However, there was one exception. Of the five local areas, four of them (Bay Area, LA Basin, San Diego-Imperial Valley, and Big Creek-Ventura) all satisfy the vast majority of local resource adequacy requirements with natural gas. The one exception is the “Other PG&E Areas” category, which has a combination of hydro, renewables, and energy storage (i.e. pumped hydro) satisfying the bulk of the local resource adequacy requirements.

Four out of five local areas rely very heavily on natural gas for grid reliability.
Note: Data is for September 2019. The “renewables” category includes solar, wind, geothermal, and biomass. The “energy storage” category includes pumped hydro and battery storage.

The reason most local areas are so heavily dependent on natural gas is because, historically, there have been no other options. There’s simply no hydro or pumped hydro available in these areas, it’s very difficult to put large-scale renewable projects (e.g. wind and solar) in densely populated areas like Los Angeles, and good luck building a nuclear plant in downtown San Francisco!

Each local reliability area in California has a resource adequacy requirement, and most of these local areas are extraordinarily dependent on natural gas for reliability.
Note: The “Other PG&E Areas” mentioned above includes Humboldt, North Coast/North Bay, Sierra, Stockton, and Greater Fresno.

California is still very dependent on natural gas capacity. But why does this matter?

If you only care about reducing global warming emissions, then this doesn’t become a big problem until you start trying to squeeze all the emissions out of the electric sector. Strictly speaking, natural gas plants don’t produce any emissions at all when they provide capacity, because providing capacity just means those plants are available to generate electricity if need be. Natural gas plants only produce emissions when they turn on to provide energy. But in reality, if natural gas plants are providing a substantial amount of California’s resource adequacy capacity, they will inevitably be needed to produce energy at least sometimes, eventually turning on and generating global warming emissions.

Studies are starting to show that the lowest-cost way for California to deeply decarbonize its electric sector may be to add a lot more renewables and storage, all while keeping a large chunk of the state’s natural gas power plant fleet online to satisfy resource adequacy requirements. If Californians are fine with continuing to rely on gas plants and the associated pipeline infrastructure for many decades to come (of course, with the understanding that we’ll be using that infrastructure less and less over time), then the state’s dependence on natural gas for resource adequacy is no big deal.

But if Californians want to squeeze every last ton of global warming emissions out of the electric sector or phase out all the natural gas power plants over time, then this lowest-cost solution isn’t going to cut it. Our state efforts to reach 100% clean electricity may be thwarted by our resource adequacy requirements and reliability needs.

How could California reduce its dependence on natural gas capacity?

At least in the near term, the only scalable solution is battery storage. In 2019, battery storage provided less than half a percent of system resource adequacy capacity. California electricity providers are poised to add thousands of megawatts of battery storage in the coming years in the form of both stand-alone battery storage and hybrid resources (e.g. solar plus storage). All these new batteries will go a long way in meeting resource adequacy requirements.

But eventually we’ll reach a limit. Just like renewables, the more batteries you add to the grid, the less effective those batteries become at meeting resource adequacy requirements (i.e. being able to provide electricity when it’s needed most). Batteries will help a lot, but they aren’t a silver bullet. (I will also explain this phenomenon in a future blog.)

So, in addition to batteries, what else can we do?

For starters, more demand response – reducing or shifting electricity consumption during certain times of day – is a good idea, and there’s a lot more that could be developed. Energy efficiency is another effective solution. Because resource adequacy requirements are based on expected electricity demand, energy efficiency reduces our expected demand and, in turn, reduces resource adequacy requirements.

More importantly, additional diversity in renewables would be a big help. Not just diversity in technologies (e.g. wind and geothermal), but also diversity in location (e.g. in-state, out-of-state, and offshore wind). The sun shines and the wind blows in different places at different times, and these differences can be exploited to meet resource adequacy requirements and keep California’s grid reliable.

Will more batteries, more demand response, more energy efficiency, and more diversity in renewables be enough to completely eliminate California’s dependence on natural gas power plants? We don’t know yet. The studies are ongoing, but we may need to look beyond those studies to new solutions. Technologies like ultra-long duration energy storage (that would store energy between seasons) or some form of dispatchable power with a firm fuel source (e.g. nuclear or converting natural gas plants to run on a combination of hydrogen and biomethane) may be required to eliminate natural gas dependence entirely. But these technologies all have a long way to go before they’re cost-effective and commercially viable.

At the end of the day, the only way to turn the natural gas plants all the way off while keeping the grid reliable will be to use every tool in the toolbox… and maybe some tools we haven’t even invented yet.