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CAISO is seeking backstop energy to deal with rising summer demand, which can be driven by increased usage of air conditioning.

California's grid operator expects to call upon its backstop energy procurement authority to deal with hot weather and high energy demand this summer and into fall, after state regulators requested the measure, citing a series of factors including "unprecedented climate change-driven heat events."

The California Independent System Operator announced July 1 it intends to kick in its "capacity procurement mechanism," enabling it to use backstop authority due to a "significant event."

"The ISO has concluded that the combination of these factors constitutes a CPM significant event that may last through October," CAISO said in an online notice. "The ISO expects to use its CPM authority to address this significant event."

The procurement comes after a June 29 letter to CAISO President and CEO Elliot Mainzer from California Public Utilities Commission President Marybel Batjer and California Energy Commission Chairman David Hochschild that requested CAISO take action. Many assumptions under California's resource-adequacy program have changed, including significant reductions in hydroelectric production due to severe drought and extreme heat that has begun earlier in the season than in previous years, the letter says. Several new resources that were due on line have been delayed, the letter says, and further development of demand-side resources in response to emergency procurement authority is uncertain.

According to the letter, at least 300 MW of thermal capacity will not be available this summer due to "unforeseen circumstances." Calpine’s Russell City Energy Center, which serves western Alameda County and the San Francisco Peninsula, is currently not operating after a fire, resulting in a temporary loss of 600 MW. The power plant operators are working with the CEC to enable the plant to run in simple-cycle mode, which would result in recapturing 300 MW, CPUC spokeswoman Terrie Prosper told California Energy Markets in a July 2 email.

State agencies were also expecting 3,160 MW of new supply-side resources, the vast majority being energy storage and storage paired with solar, to be on line by Aug. 1. Currently, at least 2,705 MW will be on line and that number will likely increase, Prosper said.

"According to project developers, some of these delays have been COVID-related (e.g., workforce slowdowns), while some have been due to supply-chain issues, including shipping incidents overseas," she said.

For demand response, the CPUC developed a new pilot program called the Emergency Load Reduction Program as a "last resort" that would allow the state's investor-owned utilities to call for additional demand reductions from large industrial customers during the most stressed grid periods. The IOUs are still in the early phases of marketing the program, and the CPUC is driving the IOUs, individual companies and industry groups to increase customer sign-ups, Prosper said.

Also cited in the letter is the fact that resources that are able to meet raw demand peak are not sufficient to meet "net peak demand," or demand levels minus wind and solar generation. The net peak is coming later in the evening, after the sun wanes and solar generation drops off.

Also, timelines for compliance with resource-adequacy processes provide "limited ability to address the changed conditions in the near term," the letter says.

CAISO said that in designating the CPM capacity, it will first look to meet its minimum designation criteria from capacity offered to the intra-monthly CPM competitive solicitation process for the month in which the CPM designation will begin. If that is not sufficient, it can then offer CPM designations to capacity not offered into the intra-monthly solicitation process, and if that is not sufficient, it might reassess and lower the minimum criteria for a CPM designation. The ISO said it intends its minimum criteria to cover capacity during the net peak hours of 4 p.m. to 9 p.m., and for energy imports that are deliverable to the ISO and supported by firm transmission agreements.

CPM designations, which are voluntary on the part of the energy provider, are for 30 days, with an option for CAISO to extend to 60 days if it determines the event is likely to go beyond 30 days. Capacity not offered under the competitive solicitation will be paid at the CPM soft-offer cap or at a higher price calculated under a cost-based formula and approved through a filing at the Federal Energy Regulatory Commission, CAISO said.

The grid operator said scheduling coordinators willing to receive a significant-event designation with non-RA capacity should contact the ISO as soon as possible, and preferably by July 7.

CAISO defines a significant event as a "substantial event, or a combination of events, that is determined by the ISO to either result in a material difference from what was assumed in the resource adequacy program for purposes of determining the Resource Adequacy Capacity requirements, or produce a material change in system conditions or in CAISO Controlled Grid operations, that causes, or threatens to cause, a failure to meet Reliability Criteria absent the recurring use of a non-Resource Adequacy Resource(s) on a prospective basis."

Assm. Jim Patterson (R-Fresno), a frequent critic of California's Democrat-dominated energy planning, in a video posted online July 1 said the problem is attributable to attempts to power the state's grid during the heat of summer with wind and solar, when days are longer and air-conditioning demand climbs.

"This is the direct result of reckless policies that have been determined over and over again by one-party rule up in Sacramento and they have been fooling themselves into thinking that their policies are going to power a 21st century economy on intermittent wind and solar at the same time they decommission natural gas power plants and flush out our water from our hydro plants early in the year—they are empty now and useless," Patterson said.

California hydro plants are at low levels due to extreme drought (see CEM No. 1646).

"[T]he ISO has decided to exercise its authority to procure additional capacity again this year," a joint statement from Mainzer, Batjer and Hochschild says. "The ISO's action is supported by a request by the CPUC and CEC and is taken out of an abundance of caution to ensure electric reliability and preserve the public health and safety of all Californians."

The ISO most recently used its CPM authority last summer, the statement says, calling CPM "an important part of our tool kit and an essential backstop to ensure a balance of demand and supply on California's electric grid."

"As these early heat events telegraph, the grid will be more strained than anticipated this summer due to record-breaking climate change impacts across the West and elsewhere. The ISO's decision to seek additional capacity is another necessary step we can take to be adequately prepared," the statement says.

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