Why Isn’t California Turning Down the Gas?

November 18, 2019 | 11:48 am
Moss Landing Power Plant stacks visible behind the dunes.Wayne Hsieh/Flickr
Mark Specht
Western States Energy Manager/Senior Analyst

California is currently going through a short-term hiatus on shutting down gas plants due to emerging grid reliability concerns. But in the long term, the state is well positioned to continue turning down the gas.

Short-term problem: California grid reliability

In an interesting turn of events, the California Public Utilities Commission came forward earlier this year with near-term grid reliability concerns. To be clear, this is a special kind of reliability concern that is distinct from the reliability concerns currently on the minds of most Californians: public safety power shutoffs (PSPS). While PSPS events are intentional power shutoffs that have been used by PG&E and other California utilities to prevent sparking wildfires during adverse weather conditions, the reliability concerns the Commission has been addressing, and the concerns I’ll be discussing in the remainder of this blog, are about having enough electricity. (California has a Resource Adequacy program whose sole purpose is to ensure the state has enough electricity – you can read more about the program in my previous blog post.)

The Commission’s near-term reliability concerns ran counter to UCS findings in our 2018 Turning Down the Gas in California report (because you can’t retire lots of gas plants if you need them for reliability). But the Commission changed a few of their assumptions about the grid of the future and, as a result, arrived at very different conclusions about the near-term fate of California’s gas fleet. What assumptions did the Commission change?

  1. A routine recalculation of the reliability contribution of renewables decreased the total capacity of wind and solar eligible to meet resource adequacy requirements.
  2. More importantly, the Commission also began to call into question the extent to which California can rely on out-of-state resources to ensure grid reliability. The Commission had previously assumed that California could rely on out-of-state resources up to a theoretical maximum (determined by limitations of the transmission system), but with historical levels of contracting with out-of-state resources nowhere near that maximum level, the Commission decided to play it safe and reduce their assumptions to align with historical levels. In other words, California isn’t sure that power plants in nearby states (e.g. Oregon, Nevada, Arizona) will be able and willing to commit to keeping California’s grid reliable, since those nearby states might need those plants to keep their grids reliable.

Those two changes, in combination with the fact that the long-planned retirement of many once-through cooling power plants is scheduled for the end of 2020, made the Commission start to worry there won’t be enough power plants to keep the grid operating reliably in the next couple years.

Are the Commission’s concerns well-founded?

I think that, at least in part, they are. Signs are starting to point towards a shortage, but the real wildcard here is the level of imports California can rely on to keep the grid reliable. If California can rely on out-of-state power plants up to that theoretical maximum (see point #2 above), then there wouldn’t be a shortage at all (see figure below). But if California can only rely on historical levels of imports, or worse, much lower levels, there could be a sizeable reliability shortfall. Without any good information on the levels of imports that are likely to be available (which is information we should really get!) some action to address this potential shortfall seems prudent.

Depending on the level of imports California can rely on (gray bar indicates the theoretical maximum), California could face a reliability shortfall as soon as 2021.
Note: A reliability shortfall would occur if the sum of the bars falls below the red line. For example, if California could not rely on any imports (the gray bars at the top), the stacked bars would fall well below the red line.

Short-term solution: Build clean resources and keep the gas online

To remedy this potential shortfall, the Commission decided to take action…on a HUGE scale.

The Commission ordered electricity providers to procure 3,300 MW new resources that will ensure grid reliability, and they also decided to pursue retirement date extensions for a few once-through cooling power plants (totaling nearly 4,800 MW) in case those plants are needed for grid reliability.

How much is 3,300 MW?

It’s a lot. It’s enough to power roughly 3.3 million homes. It’s also approximately 6% of the total capacity needed to ensure grid reliability.

What kinds of resources will get built to meet the 3,300 MW requirement?

For the most part, it’s likely to be clean resources, especially battery storage. Since California is going to need many more clean energy resources to reduce global warming emissions, that would be a great outcome. However, the decision also included a loophole that would allow new gas power plants to meet the requirements (as long as those plants are paired with energy storage). But because it’s a long and difficult process to get the permits required to build a polluting gas plant and because these new resources are needed pronto, we hopefully won’t see any new gas plants.

What about the once-through cooling power plants?

The Morro Bay once-through cooling power plant was retired in 2014 as part of a larger plan to shut down all of these environmentally-destructive power plants in California.

The retirement date extensions for some of California’s most environmentally destructive power plants are a disappointment. We’ve known for nearly a decade that these plants would need to be shut down (or extensively revamped to drastically reduce their water usage, which devastates marine ecosystems). California should have been planning for this, and there’s really no excuse for deciding all of a sudden that we need these plants a little longer, especially when some of these plants (e.g. Ormond Beach Generating Station) are located in California’s most polluted and disadvantaged communities.

To our disappointment, California has not been making much progress on actually shutting down gas plants. But the Commission has teed up investments in thousands of megawatts of clean resources that will reduce California’s reliance on gas plants in the future. And looking ahead, that future is much more promising than the events of the past year that have only prolonged the life of existing gas plants.

Long term plan: Shutter gas plants and save money

This month, the California Public Utilities Commission released results for the next cycle of the Integrated Resource Planning (IRP) process. Due to consistent pressure from UCS (with our Turning Down the Gas in California analysis in hand) along with many other organizations, the Commission decided to improve their modeling tools so that they could explore the extent to which natural gas power plants could be retired as California continues to reduce global warming emissions from its electric sector.

And guess what? The results show that in every scenario, a decent chunk of the gas fleet could be shut down by 2030, all while maintaining grid reliability. The results indicate that somewhere between two and eight gigawatts of gas capacity (roughly 10-30% of the gas fleet included in the modeling) could be retired by 2030. And that’s in addition to the few gigawatts of once-through cooling power plants that will be retired over the next decade as well.

This is a big deal! It demonstrates that UCS’s analysis was correct in concluding that gas capacity could be retired over the coming decade.

Even more importantly, these results are incredible because they represent a “first” in the transition to clean energy. While many other states and utilities have been planning to shut down coal plants early because those plants no longer make economic sense, this is the first time that any state has shown that gas plants could be shut down early to save money.

Over the long term, California can continue to reduce its reliance on natural gas plants while keeping the grid reliable.

Long term there-is-no-plan: Markets determine gas retirements

But hang on a minute. California’s electricity sector is different from many other states because it’s been (at least partially) deregulated. As a result, most of the gas plants in the state are NOT owned by the big utilities – they’re owned by energy companies.

While other states have utilities that own power plants and those utilities can decide to shut down their plants (or state regulators can order them to), California has energy companies that own the power plants. Those energy companies aren’t regulated by state government the way California utilities are, so the state can’t tell energy companies to shut down their plants. Instead, the energy companies make decisions on their own, and they only shut down a plant if the plant just doesn’t make money anymore.

So what’s the plan? When will more of California’s gas plants be retired?

There really isn’t a plan per se, but as the state adds more and more clean resources to the grid, some gas plants will get squeezed out of the market and stop making money. And when those plants no longer make a profit, that’ll be the end of those plants.

But should there be a plan?

Absolutely. And here’s why: one of the goals of California’s IRP process is to minimize localized air pollutants with early priority on disadvantaged communities. But the market isn’t going to place early priority on disadvantaged communities and retire polluting gas plants in those communities. We have to place early priority on disadvantaged communities because there is no guarantee the market will. So to achieve the state’s environmental justice goals, we need a plan for gas retirements.

Longer term plan: 100% clean electricity

Looking even further ahead, California just began the planning process for its goal to reach 100% clean electricity by 2045, a goal that was passed last year by the state legislature. While 2045 is a long way away, the state is beginning to grapple with tough questions surrounding the future of California’s natural gas power plant fleet. The state will eventually need to determine what role, if any, natural gas power plants will play in California’s 100% clean electricity future.

But in the meantime, California will keep chipping away at its reliance on natural gas power plants, adding clean resources to the grid and retiring one gas plant at a time, all while maintaining grid reliability.

About the author

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Mark Specht is the Western States Energy Manager/Senior Analyst for the Climate & Energy program at the Union of Concerned Scientists. In his role, he leads research and advocacy efforts in California and other Western states to advance the transition to a less polluting and less carbon-intensive energy system.