California's resource-adequacy market is tight and is likely to continue contracting, according to a California Public Utilities Commission state-of-the-market report issued on Sept. 3.

"As we move forward, it will be important to ensure that adequate resources are available to maintain a robust system," the report says.

The report, from the agency's Energy Division, studied load-serving entities' RA filings, ranging from the 2019 year-ahead filing to the month-ahead submission for September. In total, 11 LSEs had year-ahead local deficiencies, six reported year-ahead system deficiencies and five, year-ahead flexible deficiencies.

The issue is likely to persist, according to the report. Around 463 MW of preferred resources came on line between January 2018 and July 2019—much less than the total capacity that retired during the same time span. The retirement of once-through-cooling generators over the next few years will also reduce system capacity.

Also, about 2,000 MW of wind and solar capacity will drop off in the next year due to declining "effective load-carrying capacity," which refers to the amount of load that can be added to a system after the addition of variable renewable resources while maintaining the same level of system reliability. ELCC is dependent on the existing quantity of variable generation, and ELCC decreases over time as more renewables penetrate the grid.

On the flip side, the report noted the system has some unused capacity. More than 6,300 MW of unused capacity was listed for September, "significantly more than 850 MW" of which was physically available.

The state-of-the-market report was required by a February CPUC decision which noted that information on the state's broader RA procurement was often not visible to the public. The report is intended to provide parties with insight into California's RA market and its future. A second report is due to be filed at the end of the year.

In the period covered by the report, natural gas comprised a majority of RA resources for all kinds of LSEs; in some months, it comprised around two-thirds of total RA capacity. Combined heat and power, geothermal, hydro, pumped hydro and nuclear energy also made up a significant chunk of resources in month-ahead system RA plans.

More than 463 MW of capacity from preferred resources was added to the net qualifying capacity list between January 2018 and July 2019, of which around 167 MW was developed in local areas including San Diego-IV, Big Creek-Ventura, Fresno and Kern. Investor-owned utility contracts represented 63 percent of the new resources, while community choice aggregators and electric service providers contracted 16 percent and 20 percent, respectively.

The report also included information on local, system and flexible RA deficiencies during the study period. Waiver requests were submitted by 10 out of 36 LSEs in the commission's jurisdiction in October 2018, following their inability to procure enough capacity to meet 2019 year-ahead requirements. These entities included San Diego Gas & Electric, six CCAs—including East Bay Community Energy, Peninsula Clean Energy and Sonoma Clean Power—and three ESPs. An additional ESP did not file a waiver despite having a local deficiency.

"September, the forecasted peak load month of 2019, proved to be the most challenging," the report says. "Five LSEs had September 2019 deficiencies for a total of 847.02 MW resulting in a cumulative deficiency for CPUC jurisdictional LSEs for the first time."

The circumstances around these waivers are different from prior years, according to the report. Individual local deficiencies recorded in 2018 largely stemmed from the Encina Generating Station's scheduled retirement at the end of 2017 due to State Water Board once-through-cooling requirements. This year, however, deficiencies were more dispersed. All the LSEs that filed waiver requests had issued requests for offers, but were not able to receive adequate capacity to meet local RA requirements at reasonable prices.

"LSEs also contacted generators, brokers, and other LSEs bilaterally, but were unable to identify sufficient available capacity to meet their requirements," according to the report.

Kavya Balaraman covers the California Public Utilities Commission and PG&E Corp. for California Energy Markets. She has reported on climate policy and science in Washington, D.C. and graduated from Columbia University's Graduate of Journalism.