The California Independent System Operator warned May 12 that its power grid is still susceptible to stress during extreme heatwaves, but summer supply conditions are expected to be better than to a year ago when rotating outages were needed to prevent a grid collapse.
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Improvements are mostly driven by new capacity added since summer 2020, while forecasted load remains nearly unchanged under normal conditions, according to Cal-ISO's 2021 Summer Loads and Resources Assessment. However, back-to-back low hydro years and increased extreme weather possibilities mean the ISO could still face challenges in meeting summer load.
"Such scenarios that affect a substantial portion of the Western Interconnection and cause simultaneously high loads across the West would reduce the availability of imports into the ISO balancing authority area," according to the report, which evaluates the expected supply and demand to help prepare for the hot weather months of June through September.
The ISO forecasts peak demand of 45.837 GW for this summer, according to the report. However, when last year's extreme weather events are included in the historical weather database, the forecast jumps to 50.968 GW, 5.2% higher than the 2020 forecast.
Exports, hydro situation
California hydro conditions are again below normal, due to a second consecutive year of below normal precipitation, according to the news release. Snowpack water content peaked at 60% of normal, similar to last year's conditions, and reservoir levels have decreased to 70% of normal.
The Shasta Dam water supply forecast is at 42% of normal for the April-July forecast period, according to California Nevada River Forecast Center data. A below-normal water supply outlook translates to less hydro generation availability during the summer peak season. So far this month, ISO hydro generation accounted for 6.2% of the fuel mix month, nearly half the amount compared to a year ago, according to ISO data.
The situation is not much better in the Pacific Northwest, where The Dalles Dam water supply forecast has fallen to 85% of normal for April-September, down 20 percentage points year on year, according to Northwest River Forecast Center data. Hydro-powered generation is the lead fuel source in the Pacific Northwest, averaging more than 70% of the total fuel mix annually for the last five years, according to Bonneville Power Administration.
Excess power from the Pacific Northwest is exported to neighboring regions, such as California where imports accounted for 26.2% of Cal-ISO's fuel mix for the last five years. Cal-ISO imports reached as high as 32.5% in September 2020 during a heatwave.
Cal-ISO imports have averaged 17.6% of the fuel mix so far this month, down 7.3 percentage points year on year, according to ISO data.
"The ISO and its partners in the state and throughout the Western region are focused on being as prepared as we can for the summer heat," said Elliot Mainzer, Cal-ISO president and CEO," said in a statement accompanying the report. "New resources are coming online by summer, and we have taken the lessons learned from last year to make modifications to our market and operations. This makes us cautiously optimistic that there will be enough electricity to meet demand this summer. But there are remaining risks to reliability, such as an extreme prolonged heat wave affecting wide swaths of the West, or serious wildfires."
The ISO has added about 2 GW of additional resources since last summer, including battery storage that is expected to absorb excess renewable energy in the middle of the day and inject it back into the grid after sunset when solar generation goes offline, according to the report. The periods of stress have been in early evening hours after solar generation ramps down yet power demand remains high.
The state and ISO are also pursuing other opportunities to add another 1 GW to 1.5 GW to the system by the summer, according to the report.
The ISO also made several market enhancements to prepare for the summer in hope of avoiding a repeat of the rotating outages that occurred in 2020.
"Conservation during extreme events will again be critical to avoid shedding load," according to the report.
Power forwards in the California Independent System Operator have soared to all-time highs on concerns of tight summer conditions. Although 2021 packages started the year near 2020 package levels a year ago, the 2021 packages soon climbed and have continued to trend higher than all prior years.
SP15 on-peak June has surged to the mid-$50/MWh, 112% higher than the 2020 package a year ago, according to S&P Global Platts data. The July package is 193% above its 2020 counterpart, pricing in the low $120s/MWh, while on-peak August is 194% higher than the 2020 package in the mid-$130s/MWh.
NP15 on-peak packages have also skyrocketed. The on-peak June package has risen 106% to the mid-$50s/MWh, while July jumped 134% to the low $100s/MWh and August climbed 134% to the mid-$110s/MWh.
The impact is also evident in the spot market. SP15 on-peak day-ahead locational marginal prices are averaging 76% higher year on year so far in May, with NP15 103% higher, according to Cal-ISO pricing data. Spot power prices are also driven by higher spot gas prices with SoCal city-gate 75% higher year on year so far this month, according to Platts pricing data.