CPUC proposed decision extends gas generation

Concerned about looming reliability issues, the California Public Utilities Commission has proposed to extend the planned retirement of as much as 3,750 MW of gas-fired plants and to accept offers from gas fired generation in a proposed solicitation.

In the proposed decision, issued Sept. 12, the PUC recommends that the State Water Resources Control Board extend of the “once-through-cooling” compliance deadline for three years beyond the current Dec. 31, 2020 deadline.

California is facing the potential retirement of as much as 4,000 MW of gas-fired generation when the once-through rules, which are designed to reduce harm to sea life that can occur when ocean water is used to cool coastal power plants, take effect.

The proposed decision also requires the procurement of incremental resources of 2,500 MW above the baseline resource need for 2022 by all load serving entities in Southern California Edison’s territory. At least 60% of those resources would be required to come online by Aug. 1, 2021, 80% by Aug. 1, 2022, and 100% by Aug. 1, 2023. The procurement would accept all sources, including battery storage, demand response, energy efficiency, renewable energy resources, and existing gas-fired generating plants.

California has been de-emphasizing fossil fuel generation in recent years as the state moves toward a legislatively mandated target of deriving 100% of its energy from resources that have zero carbon dioxide emissions.

Gas-fired generation in California’s wholesale power market is also under pressure from low cost generation from wind and solar resources. The state’s gas-fired fleet peaked at 47,000 MW in 2013 and recent years have seen plant closures and scuttled plans to build new gas plants.

In June, the North American Electric Reliability Corp. (NERC) highlighted the potential for reliability issues in Southern California, noting that limits on natural gas withdrawals from the Aliso Canyon gas storage facility could potentially lead to curtailments.

The PUC noted that California’s system peak is moving to later in the day and that does not coincide with the output of solar resources, which have been growing rapidly in recent years. The PUC also noted that the state’s system peak is also shifting to later in the year and said it is concerned about the reliability of energy imports into the state, particularly hydroelectric power from the Pacific Northwest.

The commission noted that “changing hydrological patterns” are making hydroelectric resources more variable each year and peak loads are expected to remain high into September each year when less hydroelectric generation is available in California and across the West.

In addition, energy imports are becoming “increasingly uncertain” on hot days because those same resources could be needed elsewhere and higher demand could result in imported hydroelectric resources becoming “scarcer in the future.”

To balance those factors against the push for lower emission sources of generation, the commission has embarked on a new analysis of the optimal generation portfolio for the next and future integrated resource planning cycle but facing “the imminence of the 2021 system reliability needs,” commission staff concluded it did not have time to complete the analysis and go through the regulatory vetting process to meet a potential shortfall by the summer or 2021.

The PUC also is concerned that current resource adequacy requirements only look one year ahead, so that a 2021 capacity shortfall would not be detected until the fall of 2020, which would be too late to secure necessary capacity through using existing resource adequacy mechanisms. By proposing to extend the life of once-through plants and opening the procurement process to existing gas-fired generation, the commission hopes to secure enough incremental capacity in time to avoid a potential near-term generation shortfall.

The commission further argues that the potential emissions impact from those gas-fired plants would be minimal because they typically operate only during peak load, so their emissions levels and use of seawater for cooling would be low.

The earliest the commission could vote on the proposal decision is Oct. 24.