Electricity Markets

CAISO Touts Successes During Heat Wave, Details Areas For Improvement

A new report from the California Independent System Operator (CAISO) details the successes and failures of the system’s electric grid during the record heat wave at the end of the summer.

From Aug. 31 through Sept. 9, California, and much of the West, experienced 10 days of triple-digit heat with only minimal nighttime cooling and record electricity use. On Sept. 6, record temperatures were set all over California and the West and demand on the CAISO system reached a record peak of 52,061 megawatts (MW). During that time, CAISO issued Flex Alerts calling for voluntary consumer conservation for a record 10 consecutive days.

During the heat wave event, CAISO’s daily average prices rose to $600 per megawatt hour (MWh) with maximum prices reaching $2,000/MWh in the real-time market. Day-ahead average prices reached $300/MWh.

Despite the intense heat, CAISO “was able to keep electricity flowing without interruption thanks to increased capacity added under California’s resource adequacy program, new state programs that provided non-market resources to address extreme events, enhanced collaboration with state and federal agencies and significant conservation by commercial and residential electricity customers,” the ISO said in its Summer Market Performance Report Sept 2022.

The report also cited needed market enhancements to improve how increasingly frequent, extreme, and long heat events are managed, including the clearing of energy exports in the market and real-time testing for resource sufficiency. In particular, the report identified needed software improvements, especially for the clearing of exports and the resource sufficiency test used in the Western Energy Imbalance Market (WEIM).

CAISO credited several factors to the fact that electricity kept flowing during the heat wave and it did not have to call for rotating outages, including increased capacity through resource adequacy procurement since summer 2020, including more than 3,500 MW of lithium-ion battery storage.

CAISO also credited market enhancements, including clarification of scheduling priorities, enhancements to resource sufficiency evaluations and electricity market pricing designed to incentivize generation during periods of high demand.

CAISO noted, however, that demand during the heat wave “far exceeded” the 49,748 MW of resource adequacy shown to the ISO and, thus, was “insufficient” to cover peak demand during some periods.

To fill the gap, CAISO called on up 1,300 MW of demand response, comprised of 500 MW of voluntary demand response bid in the market and 800 MW of emergency demand response.

Regional resources and coordination were also a factor. CAISO called on 6,500 MW of imports from outside its system during the height of the heat wave, as well as 1,000 MW from WEIM.

Among the non-market resources that helped keep the lights on during the heat wave, CAISO said they ranged from non-market demand response, to behind-the-meter backup diesel generators, and temporary grid-side natural gas-fired resources that were deployed by utilities and state agencies with coordination from a wide variety of government, utility, and customer and business groups.

In terms of improvements, CAISO recommended changes that would ensure that energy storage resources are appropriately charged and accounted for in ISO systems to avoid manual corrective action, which happened during the event.

CAISO identified a software issue that resulted in storage resources not charging sufficiently early in the day. Specifically, storage resources that bid above $150/MWh to charge were not charged by the market. “The high prices experienced during the heat wave presented new scenarios for the ISO to learn about the complexities and challenges of managing battery state of charge,” the report said.

During the stresses created by the heat wave, CAISO also discovered there was both over- and under-counting of capacity available to the ISO in the WEIM resource sufficiency evaluation.

If a balancing authority fails the resource sufficiency evaluation, transfers into it from other WEIM participants are limited until the insufficiency is resolved.

On Sept. 6, the ISO failed the resource sufficiency evaluation in two instances, and transfers into the ISO were limited, but not material because the limits were well above the actual available transfers of 1,000 MW from the WEIM.

Upon further investigation, CAISO found that there was both over- and under-counting of capacity, the net impact of which would have potentially led the ISO to fail the resource sufficiency evaluation up to an additional four instances.

CAISO said it has “already addressed some of these issues” and is “evaluating fixes or potential enhancements for the others.”

CAISO has scheduled a stakeholder call for Nov. 17 to review details of the analysis and answer stakeholder questions.

CMUA Responds to Report’s Findings

In response to the report’s findings, Barry Moline, executive director of the California Municipal Utilities Association (CMUA), said that “Preparing for such an event this summer, publicly owned electric utilities and water agencies coordinated closely with the Governor’s Office, California Energy Commission, and the California Independent System Operator. We worked diligently to locate, confirm and generate firm power with every available back-up generator; facilitated customer conservation at key times; and pushed existing power supply to its limit. Only by working together did we avoid major disruption.”

Moline said that going forward, “publicly owned electric utility and water and wastewater agencies will continue to coordinate closely with the Administration and CAISO to decarbonize while assuring that California has the infrastructure and power supply it needs to provide affordable and continuous power.”