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Highlights

ISO previously warned of looming resource deficiency

Imports supply 25% of California's energy

Washington — California faced the prospect of rolling power blackouts for the first time in almost 20 years, and stakeholders are pinning the blame on regulators' failure to heed warnings that shortages could occur unless steps were taken to ensure adequate resources were on call to cover peak demand periods.

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Those warnings came from the California ISO, power producers and the California Public Utilities Commission's own former president.

"We told the CPUC 4,700 MW was needed through 2022 and that the gap started in 2020," ISO CEO Steve Berberich said during an Aug. 17 briefing. "Despite all that, only 3,300 MW was authorized for procurement, but that's not starting [until] 2021."

The ISO in August 2019 warned of a looming system resource adequacy deficiency and urged the PUC to develop a procurement plan for 2020-2022 to meet reliability needs. In addition, concerned that the rise of community choice aggregators had splintered the state's central resource planning capabilities, former PUC President Michael Picker has repeatedly warned lawmakers and commissioners that California risked another energy crisis without a plan to ensure that all load-serving entities met resource adequacy requirements.

The PUC has worked at length to establish resource adequacy requirements, but it has stopped short of requiring long-range commitments from utilities and other load-serving entities. In June, the PUC adopted three-year local requirements that will begin in 2021 and ordered PG&E Corp. subsidiary Pacific Gas and Electric and Edison International subsidiary Southern California Edison to conduct all-source solicitations for local resource adequacy procurements. But some observers have expressed concern that those steps do not go far enough to guarantee that future reliability needs are met.

During the Aug. 17 briefing, which was held to address rolling Aug. 14-15 blackouts in California and the prospect of more to come, Berberich said the state's resource adequacy program was broken and must be fixed because it does not address load requirements after the sun goes down and solar generation is gone. And he suggested that much of the problem stems from the PUC's failure to act on ISO warnings.

"I know the commissioners," Berberich said. "They are thoughtful, well-meaning people ... dedicated to reliability as much as we are, but they do have ponderous processes and those processes are difficult when you have a rapidly evolving environment as we are in now."

Acknowledging the PUC was considering the matter in an ongoing docket, Berberich said, "[w]e would like them to work quicker on it."

If California is going to rely on imported electricity to fill the gap, it must be secured capacity, Berberich said, noting that the state now gets an average of 25% of its energy needs from imports.

The entire western portion of the US has been experiencing extremely hot temperatures, and therefore about 4,000 MW to 5,000 MW of the imports California normally would receive have been unavailable because other states need to use their own output, he said, adding: "The reforms I've suggested are reforms we've been talking about for quite a while, and they haven't moved as fast as we would like them to."

Gas-fired resource commitments

Former Western Power Trading Forum Executive Director Gary Ackerman in an interview said battery storage installations in California have nowhere near enough capacity or duration to ensure the electricity generated by existing solar facilities is available at night.

Grid-connected solar accounts for about 12,000 MW of capacity in California, while wind generation now supplies only about 4,000 MW in the state, Ackerman said. And Berberich said California currently has only about 200 MW of storage.

Ackerman also said replacing California's gas-fired generating fleet with storage would cost about $85 billion, excluding transmission costs. According to the ISO, gas-fired generation accounts for about 60% of the capacity in the grid operator's control area.

But the amount of generation that is not already committed under contracts in or outside the state is diminishing because owners cannot stay in business selling energy during peak periods alone when solar is no longer available, Ackerman said. They also must have capacity contracts, he said.

"They've retired plants outside California, too, so power imports are off," Ackerman said.

Independent Energy Producers Association Executive Director Jan Smutny-Jones in an interview said his organization supports decarbonizing the grid so long as a well-balanced portfolio is maintained. "We should do what we can to conserve investments in the gas fleet and invest in other technologies as well," he said.

Smutny-Jones expressed concern that blackouts could impede support for the expansion of renewable energy and storage, although he also warned that policymakers must not let aspirational goals interfere with keeping the lights on. "They need to pay greater attention to what we need to meet our peaking resources both during heatwaves and also in the wintertime when solar ramps down earlier in the afternoon," he said.

Western Power Trading Forum Executive Director Scott Miller in an interview said because everyone across the West is developing renewables instead of new fossil fuel-fired generation, they are using the energy from existing dispatchable gas-fired units to balance their in-state renewable resources rather than exporting it to California.

What is needed is a West-wide capacity market such as a regional transmission organization could provide, Miller said. But he noted that the ISO would have a problem overseeing such a market since state law prohibits the grid operator from sharing seats on its board of governors with representatives from other states.

However, Miller proposed that participants in the ISO's Energy Imbalance Market could set up a corporation that could hire a grid operator such as the Southwest Power Pool to run an RTO that could guarantee capacity for California.

With suitable capacity contracts, gas-fired generators would supplement, but not replace, renewable energy generators, Miller said. Capacity payments would allow the gas plants to stand idle for much of the time until needed, he said, added: "If you have got a market to compensate them, then they offer themselves as resource adequacy."