CPUC calls for procurement of 3,300 MW of new resources

The California Public Utilities Commission (CPUC) on Nov. 7 issued a decision ordering load serving entities (LSEs) in the state to collectively procure 3,300 megawatts of new, “renewable integration” resources.

At the same time, the commission’s decision, under Docket #R.16-02-007, recommends that the State Water Resources Control Board extend the deadlines for 3,750 MW of fossil fuel plants scheduled to retire by Dec. 31, 2020, under the state’s revised once-through-cooling (OTC) rules for up to three years.

The CPUC’s decision is aimed at minimizing the possibility of energy shortfalls in the 2021-2023 time period.

With respect to the procurement of “system-level resource adequacy capacity” of 3,300 MW by all LSEs within the California Independent System Operator balancing authority area, at least 50% of those resources have to come online by Aug. 1, 2021, 75% by Aug. 1, 2022, and all of the capacity has to be online by Aug. 1, 2023.

For purposes of meeting the requirements of the order, the commission says it would not distinguish between existing and new resources, but it would prohibit new fossil-fuel-only resources (without storage) at sites not previously used for electricity generation. However, capacity upgrades and repowering projects that add capacity to existing resources would be eligible under the order. In addition, capacity for which an LSE may have already contracted for to meet 2022 baseline resource needs could be used to meet the needs identified in the new order.

Procurement contracts under the order should be at least for 10 years, except for energy efficiency contracts, which must be at least five years long. Contracts for existing resources should be at least three years long, except for OTC plants, where contracts may not be longer than any extension granted by the state’s water board.

The PUC envisions the capacity additions as a “bridge to allow new clean resources to come online” and says the procurement order is part of a “least regrets” strategy to avoid electricity shortages that “would most certainly lead to regrets.”

California has set a target of having 60% its electricity power from renewable resources by 2030 and 100% generated by zero carbon dioxide emitting sources by 2045.

The PUC says the need for the additional capacity is being driven by analysis that shows “impending potential electricity shortages” The analysis shows that current electricity supplies are “tight” and that reliance on imports will be increased “beyond historical levels, creating uncertainty in electricity supply until more in-state generation is built by entities that serve load, including “utilities, community choice aggregators, and direct access providers.”

The PUC says the impending tightness of supply is driven by several market trends, including a shift in system peak load to later in the day and later in the year, which does not coincide with the output of solar power resources; higher levels of wind and solar power; the retirement of natural gas plants, and a decline in reliable imported electricity to meet peak demand as other states increase their renewable generation.

Another aspect of the order is the proliferation of community choice aggregators, which often do not have their own generation sources, but buy electricity supplies on the market, mostly generation from renewable sources.

Instead of asking the state’s investor owned utilities (IOUs) to handle the entirety of the procurement and the allocation of costs to customers, the order requires all LSEs to procure system resource adequacy and renewable integration capacity on behalf of their customers. If an LSE is not able to procure the required capacity, the PUC would require the relevant IOU to procure the additional capacity and allocate the costs to the customers of the non-complying LSE.

The order lists the resource adequacy capacity allocation for 2020 by LSE type as 66.5% to IOUs, 24.5% to CCAs, and 9.0% to electricity service providers (ESPs).

The PUC notes that additional capacity will be needed beyond 2023, but that is the subject of a separate proceeding at the commission, the 2019-2020 Integrated Resource Planning cycle, that is already under way.

In addition, issues – such as the eligibility of imported power to meet California resource adequacy requirements and the development of a central buyer for local resource adequacy capacity – are ongoing in a separate proceeding, R.17-09-020.