trending Market Intelligence /marketintelligence/en/news-insights/trending/HDvQ00NX7hjOSQEuZeobfg2 content esgSubNav
In This List

Seeing capacity shortage, California may keep gas plants, order more resources

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Seeing capacity shortage, California may keep gas plants, order more resources

An administrative law judge with the California Public Utilities Commission on Sept. 12 proposed to require Southern California Edison Co. and other electric service providers on that utility's transmission system to solicit 2,500 MW of generation capacity to address potential power shortages beginning in 2021.

Further, the proposed decision by Judge Julie Fitch would have the commission urge the California Water Resources Control Board to extend by up to three years its end-of-2020 deadline for retiring at least 2,500 MW, and up to 3,750 MW, of aging gas-fired plants in Southern California with "once-through" ocean water cooling systems.

The state water board has been requiring plant owners to retire coastal gas-fired facilities that use such cooling systems due to concerns they harm marine life. The plants also are unpopular with surrounding communities because of their air emissions. However, keeping the plants in service for a few more years would serve as a bridge until new resources are developed, Fitch said.

The plants at issue, according to the proposed decision, include Alamitos units 3, 4 and 5, totaling about 1,200 MW; Huntington Beach unit 2 with 200 MW; Redondo Beach units 5, 6 and 8, totaling 850 MW; and Ormond Beach Generating Station units 1 and 2 with 1,500 MW. Those plants have been operating at levels well under 10% of their potential output so impacts to air and water have been minimal, Fitch said.

In order to allow for public comments, the earliest the commission could vote on whether to adopt the proposal is Oct. 24.

Bids would be called for all resources

The proposed procurement would be on an all-source basis and would include both new and existing resources. At least 60% of the resources acquired would have to be in service by Aug. 1, 2021; 80% by Aug. 1, 2022; and 100% by Aug. 1, 2023.

"Deploying renewable energy and battery storage, as well as gas-fired generation, to meet the reliability needs identified by the CPUC and stakeholders will advance California toward a low-carbon, reliable future," the commission said in a news release.

Edison International subsidiary SCE would be required to procure 1,745 MW for its bundled retail customers. Certain other load-serving entities, including community choice aggregators and electric service providers having direct access contracts with customers, would be required to buy new resources, too.

The need for the commitment of additional generation resources was identified in a recent California ISO forecast. CAISO warned that the state could face a capacity shortfall of 4,700 MW in 2022.

According to the proposed decision, a June 20 ruling in a proceeding to coordinate long-term procurement planning noted that by 2021, the electric system could end up relying on all available resources, including nearly all available imported energy from other states, which would be roughly double the historical usage of imports for system reliability purposes.

The need for additional resources is the subject of hot debate with some parties, such as the California Community Choice Aggregation Association and Alliance for Retail Energy Markets, that want more detailed studies. Others say arrangements to procure more capacity should be made immediately because time already is too short to avert potential power shortages.

Given the nearness of the 2021 system reliability needs, Fitch said not enough time remains for further analysis. Procurement must take place soon in order to get resources online by then, "since electricity shortages would most certainly lead to regrets" and too few system resources could lead to market manipulation, the judge continued.

Sempra Energy subsidiary San Diego Gas & Electric Co. weighed in on the matter, contending that shortages are unlikely because CAISO's analyses are very conservative. But SCE said expedited action is needed to develop new clean energy resources because the utility's own analysis shows the shortfall in 2021 could be as high as 5,500 MW due to retirement of once-through-cooling plants, uncertainty over whether out-of-state energy could be imported, and other factors.

Fitch said the proposed decision "reflects the commission's heightened concern about the reliance on imports without firm contractual obligations to meet peak demand reliability needs." Western states are retiring coal resources and adding significant amounts of renewables, so California no longer can assume it can rely on surplus imports, including hydropower from the Northwest, she noted.