Cal-ISO files testimony with CPUC to boost planning reserve margin to 17.5%

Houston — California Independent System Operator officials filed testimony in the California Public Utilities Commission's emergency reliability rulemaking focused on procuring additional resources for the summer to boost the planning reserve margin to 17.5% from 15%.

In testimony filed Jan. 13, Jeff Billinton, Cal-ISO director of transmission infrastructure planning, and Karl Meeusen, Cal-ISO senior advisor of infrastructure and regulatory policy, also explained why the planning reserve margin should be applied to both the peak load hours and the early evening hours when summer demand remains high after sunset but solar output has left the grid.

"The Commission should temporarily increase the planning reserve margin from 15% to 17.5% and apply this to both the gross and net load peak," Meeusen said in the testimony. "This increase provides a regulatory requirement to procure additional capacity needed to maintain reliability with least regrets. This temporary increase will also provide the CAISO with critical access to additional backstop procurement authority that will maximize the solutions available should a resource adequacy deficiency arise."

Hours applied

Significant renewable penetration has shifted the peak to later in the day, and on hot days load may still be high after the sun sets because of air conditioning demand and as other load that was being served by behind-the-meter solar comes back on the system, according to Billinton's testimony.

The Root Cause Analysis, conducted by the ISO, PUC and California Energy Commission, pointed to the net demand peak period as an especially challenging period for grid operations during the August 2020 heat storm.

"The current practice assumes resources available at the demand peak will be available during other hours of the day as well," Billinton said in the testimony. "Given increasing variable and intermittent resources, this assumption is no longer accurate, especially with solar resources generating at predictably lower levels during evening hours."

That's why the planning reserve margin should be applied to the most critical hour after peak when demand is still relatively high but solar output is rapidly declining, according to Billinton.

"I recommend increasing the planning reserve margin to 17.5% for the months of June through October 2021 and applying the increased planning reserve margin to both the gross system peak demand and to the most critical hour after peak, when solar production is very low or zero," Billinton said in the testimony.

Recommended planning reserve margin

"If the commission does not increase the planning reserve margin, the new capacity additions ... will simply push some other capacity off of resource adequacy showings, leaving the system no more resource adequate than it was before the procurement authorization," Meeusen said.

Allowing for contingency reserve requirements, demand variability and forced outage rates will require a planning reserve margin of 17.5%, according to Billinton's testimony.

The PUC established the current planning reserve margin of 15% in 2006 using the CEC's hourly forecast.

Basing a target on average weather is not useful, Gary Ackerman, Foothill Services Nevada president and Western Power Trading Forum former executive director, told S&P Global Platts Jan. 13, adding planning has to be more targeted to severe weather since that is when the forced outages took place.

"They have to do something and they have to do something quickly," Ackerman said about preparing for this coming summer with a proper reserve margin.

The current construct is inconsistent with the evolving resource fleet and changing climate conditions, Billinton said in testimony, adding an updated planning reserve margin is necessary to ensure the state can continue to operate the electric grid reliably without having to shed load during heat events.

"Increasing the planning reserve margin will allow the ISO to conduct any necessary backstop procurement under its capacity procurement mechanism prior to the operating month, instead of waiting for real-time emergencies, when capacity may not be available," Meeusen said in testimony.

The ISO previously recommended a 20% planning reserve margin in Nov. 30 comments, based in part on data showing forced outage rates at or above 10% during peak period.

Further review shows that the 10% forced outage rate is likely an upper bound as the original assessment was at a daily granularity where some outages may be non-coincident both with other outages and peak load, Billinton said.

August 2020 outages

A historic heat storm led the ISO to declare Stage 3 emergencies on back-to-back days, triggering rotating power outages for the first time since 2001. The outages took place Aug. 14-15 to maintain grid stability after two gas plants and 1,000 MW of wind generation across the state was lost and unable to serve load, the ISO has said.

During the heat wave, numerous flex alerts were issued, restricted maintenance operations were declared, convergence bidding was suspended and the ISO solicited available capacity using its Capacity Procurement Mechanism.

The SP15 on-peak day-ahead locational marginal price set a record high of $697.91/MWh Aug. 18 when ISO peakload reached almost 47 GW, a nearly three-year high, according to ISO data.