California utility regulators ordered the state’s three investor-owned utilities (IOUs) to put in place a range of programs intended to cut energy demand and boost energy supply during critical hours of the day in an effort to ensure reliability in the case of an extreme heat event in the summers of 2021 and 2022.
The decision requires the state’s IOUs to collectively procure at least 1,000 MW of demand- and supply-side resources for this summer. More than 500 MW in supply-side resources have already been contracted for at the direction of earlier action by the Public Utilities Commission (PUC). The PUC’s most recent decision is intended to spur roughly 500 MW in additional demand-side resources (such as demand response and batteries) by this summer. By summer 2022, demand-side resources are expected to total nearly 1,000 MW.
In addition, the PUC said that another 2,000 MW of battery storage will be ready to serve the grid next summer, and that 8,000 MW of clean energy resources are under development to be online over the next three years.
The PUC opened a regulatory docket last November in response to a mid-August 2020 extreme heat event that required the California Independent System Operator (CAISO) to impose rotating power outages. In an effort to ensure grid reliability this summer, the PUC ordered the following new initiatives and enhancements to existing programs:
• Increased Overall Utility Procurement Requirements: Regulators ordered utilities to procure a least an additional 2.5% of resources for all customers in their service areas. Doing so would increase the planning reserve margin from 15% to 17.5%. The change sets minimum demand- and supply-side resource targets for this summer of 450 MW for Pacific Gas and Electric, 450 MW for Southern California Edison, and 100 MW for San Diego Gas and Electric. For supply-side resources, utilities must give preference to storage contracts and upgrades in the efficiency of existing generation resources, and for shorter contract terms.
New Demand Response Programs: Regulators ordered the three IOUs to pilot an Emergency Load Reduction Program. The program would give demand response providers (and other companies providing new services to manage electricity demand) the ability to show how their programs can support the grid.
Improved Rate Plans to Encourage Conservation: Regulators ordered utilities to modify their Critical Peak Pricing programs to ensure the program is more effective and responsive to the critical hours of a grid emergency. Revisions include shifting the Critical Peak Pricing event window for residential and non-residential customers to 4 p.m. to 9 p.m., increasing the maximum number of Critical Peak Pricing events allowed per year, and providing customer education to boost participation.
Improved Existing Demand Response Programs: The PUC ordered that existing demand response programs be modified to expand participation, including temporarily allowing year-round enrollment in utility “interruptible programs.” These programs allow industrial and large commercial customers to pay a lower rate in exchange for allowing the utility to curtail their energy usage when energy demand is high and the reliability of the electric grid is threatened.
Last November, the PUC ordered utilities to procure 3,300 MW of new, non-emitting electricity resources, and make 10-year, long-term investments in new in-state generation.
All of these actions followed a mid-August 2020 heat wave that forced the CAISO to initiate rotating power outages in California. Last January, a root cause analysis of the heat event outlined short-term and longer-term actions to mitigate electricity shortages.
The report confirmed the CAISO’s initial findings that a trio of factors were responsible for the blackouts: extreme weather conditions, resource adequacy and planning processes, and market practices. The report included analysis of how a range of energy resources performed, including solar, energy storage, and natural gas.
Among the recommended actions was expediting the regulatory and procurement processes to develop more resources that can be online by this summer.
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