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FEATURE: Cal-ISO CEO focused on summer 2021, modernizing resource adequacy system

Highlights

California to go through energy storage revolution

Final root cause analysis due out by end of year

250-MW RMR approved for next summer

Houston — California Independent System Operator president and CEO Elliot Mainzer is operating on two time schedules as he takes over leadership of the ISO and that is to improve the system ahead of next summer after the ISO initiated rotating outages in August, while also working to modernize the resource adequacy system to recognize the changing resource mix.

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"My focus is very, very much on reliability and resource adequacy and certainly preparedness for next summer," Mainzer told S&P Global Platts, adding it is a pivotal moment for the state coming out of the August events. "We have a lot of work ahead of us. We'll be putting out the final root cause analysis of those events shortly and we have a number of important actions to get ready for next summer. That's job No. 1.

"There's a tremendous amount of opportunity and challenge ahead."

Mainzer took over ISO leadership in late September.

Summer outages

A nearly weeklong historic heat wave in mid-August led the ISO to declare stage 3 emergencies Aug. 14-15, triggering rotating power outages for the first time since 2001. California Gov. Gavin Newsom proclaimed a state of emergency and sent a letter Aug. 17 to the ISO, California Energy Commission and California Public Utilities Commission seeking details on the outages.

In early October, the three entities released a joint preliminary root cause analysis that found extreme heat and energy demand across the entire western region, a shortfall in resource planning targets, and certain day-ahead market practices combined to create supply gaps. The final root cause analysis, which will be released by the end of the year, does not have any fundamental changes from the preliminary report, Mainzer said, but adds details on the September heat wave.

Members of the Federal Energy Regulatory Commission agreed Dec. 17 that urgent work is needed to prevent a similar situation in California next summer but voted against a formal probe into the matter that would have restricted FERC's dialogue with the grid operator and stakeholders, which Mainzer called a good outcome, adding he looks forward to working with commissioners.

Resource adequacy work

The North American Electric Reliability Corp. expected most of the continent to have adequate resource capacity in the coming years but saw some risks in areas where the generation mix was rapidly shifting toward more intermittent renewable energy and demand-side resources were growing, including nearly all parts of the Western Interconnection.

"Next summer is not that far away so the amount of incremental procurement that the [California Public Utilities Commission] will be able to do, and other load-serving entities and local regulatory authorities, is relatively modest," Mainzer said. "We got the system we'll be dealing with primarily for next year, so one of the first things we're doing is working very closely with the battery storage industry."

California is going to go through an unbelievable revolution in energy storage, Mainzer said. The ISO will have 2 GW of battery storage on the system by next summer that "will play a very, very important role in providing dispatchable capacity during that evening net peak," Mainzer said about coordination and collaboration with the storage industry.

The ISO board recently approved a reliability must-run contract for Midway Sunset Cogeneration Company's 250-MW power plant to ensure California has the capacity and energy needed for next summer's demand, Mainzer said, adding RMR transactions are an action of last resort.

Renewable growth

"I'm sort of operating on two time steps," Mainzer said. "In the short term, we had a tough moment here last summer. That's unacceptable. None of us in the reliability patch can accept that, so we have to do everything possible to try to mitigate for next summer.

"Longer term, we're working very closely with the PUC, the Energy Commission and others in the regulatory space to try to make sure the resource adequacy paradigm in California is modernize sufficiently to recognize the changing resource mix. There's a lot of additional solar and batteries and wind and other renewables coming onto the system."

There is 4.8 GW of wind, solar and storage in the ISO interconnection queue with 2021 online date and executed interconnection agreements, according to ISO data.

"We are going to continue to evolve our market rules so we can interface with the new resources as efficiently as possible, try to send the right price signals, try to make sure the resource adequacy elements of our tariff are as effect as possible and harmonize, to the maximum extent possible, with the state resource adequacy rules as well," Mainzer said.

Right now, the state is trying to play catch up, Mainzer said about getting ahead of the procurement curve to make sure market operations are as efficient as possible to get back to a healthy reserve margin for a reliable power system on the path to decarbonization.

"There's a lot of work to do still to really unleash demand response and distributed energy resources, both at the distribution level and at the wholesale level," Mainzer said. "I'm very committed to trying to work in a very intellectual, honest and rigorous way to figure out what are the capabilities of those resources that can be provided at the local level and also extracted into the wholesale grid to the extent feasible and to the extent that it makes sense operationally and economically. There's friction in the system. We haven't figured it out yet. I'm very excited to bring people together and try to accelerate the solution development for those resources."