California regulators have approved a massive build-out of clean energy, batteries and an as-yet-undetermined mix of long-duration energy storage and dispatchable zero-carbon resources. The new capacity will replace natural-gas power plants and the state’s last nuclear power plant that are set to shut down over the next five years.
And unlike previous proposals, Thursday’s order from the California Public Utilities Commission won’t require any natural-gas power plants in that mix.
California already leads the nation in solar installations, and this order could double the state’s current solar generating capacity, according to Ed Smeloff, director of grid integration at advocacy organization Vote Solar.
The CPUC’s midterm procurement proceeding calls for 11.5 gigawatts of zero-carbon capacity to be procured by 2026, with responsibility shared between utilities Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric, as well as the 22 community choice aggregators that serve a large and growing share of the state’s electricity customers, and a small share from the state’s retail energy providers.
That capacity is meant to replace more than 3.7 gigawatts of coastal natural-gas plants set to close by 2023, as well as the 2.2 GW of capacity from PG&E’s Diablo Canyon nuclear plant, which will be shut down by 2025.
The “net qualifying capacity” to replace those resources must be available for the grid year-round to supply the state’s peak grid demands, which means that any solar and wind power added through this procurement will need to be supported by batteries that can store and shift that energy.
The CPUC's 2019 order for 3.3 GW of capacity to help replace closing natural-gas plants has largely been met with battery and solar-battery projects. Nearly 2 GW of four-hour batteries are set to be active on the grid by this summer.
It’s likely that much of the future procurement will combine solar and batteries, although the CPUC also emphasizes the potential for wind power, and particularly offshore wind farms, to meet future needs.
The structure of the procurement could drive the development of a significantly greater amount of solar generation capacity to supply those batteries. Smeloff estimated in a Thursday statement that the CPUC’s order could lead to as much as 13 GW of large-scale solar being deployed over the next four years.
But the CPUC is also calling for at least 2 GW of “long-lead-time resources” to be brought online by 2026. This will ensure enough capacity will be available if poor weather prevents solar generation from supplying enough energy to charge those batteries for their daily needs.
At least 1 GW of that must consist of “long-duration storage — pumped hydro facilities or other emerging technologies that can store energy for eight hours or longer,” CPUC Commissioner Clifford Rechtschaffen said in a Thursday statement.
Another gigawatt must come from zero-emissions resources “able to generate when needed, for as long as needed,” according to the CPUC’s order — a definition that would include geothermal power but could also include nascent or as-yet-undefined technologies.
The goal is to “ensure that we can keep the lights on during periods of greatest demand, even as we retire Diablo Canyon and other natural gas plants,” he said.
A step away from natural gas to meet California’s peak demands
California’s grid is under increasing stress during hot summer evenings, when its growing share of solar power fades from the grid while air-conditioning demand remains high. State grid operator CAISO was forced to order rolling blackouts of several hundred thousand customers last August, and it is anticipating another challenging summer as rising temperatures and drought conditions stress electricity supplies across the U.S. West.
As part of a series of emergency orders designed to secure the grid against further blackouts, the CPUC ordered California’s utilities and community choice aggregators to expedite existing contracts for energy storage projects and expand the scope of demand response resources. But it also ordered the state’s big three utilities to secure contracts for up to 550 megawatts of existing natural-gas power plant capacity.
Similar considerations initially led the CPUC to consider including up to 1,500 megawatts of natural-gas power plant capacity in its procurement order through 2026 to mitigate the risk that solar and batteries might fail to cover the grid’s needs.
But clean energy and environmental groups challenged that carve-out, arguing that it would put the state out of step with SB 100, the 2018 law that set California on a path toward 60 percent renewable energy by 2030 and 100 percent carbon-free energy by 2045.
Two days before Thursday’s vote, the CPUC issued a new proposal that dropped the natural gas requirement. Luis Amezcua, a senior campaign representative with the Sierra Club, called that decision a “testament to a lot of public support for the need to build clean energy, and to build it at the level we need to make progress on our air quality commitments.” More than 200 public comments opposed including natural gas as part of the procurement.
To ensure compliance with a 2018 agreement that Diablo Canyon’s round-the-clock carbon-free energy isn’t replaced by energy with a higher carbon emissions intensity — a possible outcome if it’s replaced by a grid mix with a significant share of natural-gas-generated electricity — the CPUC ordered that at least 2.5 GW of “zero-emitting generation, generation paired with storage, or demand response resources” be online by 2025.
Similar concerns over the energy mix to replace Diablo Canyon led the CPUC to increase its initial 2026 target of 7.5 GW. At the same time, the larger procurement is expected to help California reach its more aggressive carbon emissions reduction target of cutting emissions to 38 million metric tons (MMTs) by 2030, as opposed to a 46 MMT target it had used for its previous procurement plan.
Amezcua noted that modeling indicates that the state may have to retire an additional 2 GW of natural gas to reach that 38 MMT target — a finding that would conflict with any plans to retain natural gas through 2026.
“Based on the information we have, we don’t see a new need for gas, and in fact, we agree that we need to start retiring the gas,” he said.
Testing the limits of solar and batteries as a grid resource
The CPUC’s order warned that removing its natural-gas requirement was “the most difficult choice we must make in this decision,” and that it could be revisited in the years ahead.
“We take very seriously the zero-emission goals for the electric sector by 2045 and for the state in general,” the CPUC wrote. “At the same time, we face the responsibility to ensure that the delivery of electricity remains reliable in the face of massive changes in the resource mix over the next few decades.”
Those massive changes include a volume of renewable energy that “exceeds the percentages on any other grid anywhere in the world that is of similar scale,” it wrote. “We are also simultaneously seeing a huge proliferation of battery storage resources, also at a scale not seen anywhere else.”
CAISO is projecting that roughly 1.4 GW of batteries will be available to serve the grid this summer, a big jump from last summer. But CAISO, utilities, community choice aggregators (CCAs) and battery system operators “still require additional experience and possibly policy guidelines to ensure they are optimized for grid use during the most extreme weather and grid events,” the CPUC order noted.
Over the coming months, the CPUC will be working with the California Energy Commission to study the integrated resource plans being submitted by the state’s big three utilities, CCAs and retail electricity service providers, which will be combined into a preferred system portfolio for the state as a whole.
“This will also give us time to evaluate how our newest reliability resource, battery storage, performs over the course of this summer, and how our electricity system performs overall,” the CPUC stated.
The order also pointed out that the risk of more grid emergencies could well outweigh the risk of allowing some natural-gas-fired resources to play a role in securing reliability. California’s rolling blackouts last summer triggered attacks on its clean energy policies, as the order acknowledges.
While “this explanation is inaccurate,” according to the state’s joint-agency report on the August 2020 blackouts, “the challenge remains that outages and reliability problems can seriously erode public confidence in our environmental goals for the electric sector.”
The short- and long-term challenges of a carbon-free and reliable grid
According to Vote Solar's Smeloff, the CPUC’s procurement will require the build-out of roughly one-quarter of the state’s existing generation capacity in just five years. While the CPUC will allow utilities, CCAs and electricity service providers to import some of the required capacity from out-of-state resources, those will be held to the same zero-emissions strictures that apply to the overall procurement.
The schedule set for the procurement — 2 GW by 2023, another 6 GW by 2024, another 1.5 GW by 2025 and yet another 2 GW by 2026 — worries some of the utilities and CCAs that will be responsible for meeting it.
The California Community Choice Association noted in comments that the “dramatic increase” from 7.5 GW to 11.5 GW “is problematic, especially since the increased procurement may lock in high costs for ratepayers even while technology costs are declining.” Solar power and lithium-ion batteries are falling in price and could be cheaper in later years, while a rush to procure gigawatts' worth of resources in the next few years could drive up costs.
Southern California Edison also questioned the scope of the procurement in its comments, suggesting that the CPUC delay ordering new clean energy procurement until it has assessed the amount of resources being brought online through existing processes across the state.
Similar uncertainties lie ahead for the CPUC’s demand for gigawatts of long-duration storage and clean, reliable generation capacity. Long-duration storage is a challenge to finance — pumped hydro projects, the only well-proven version, require billions of dollars and years of lead time to develop. Other approaches have yet to be proven out at commercial scale.
And any form of long-duration storage must contend with energy markets that are being filled with increasingly low-cost solar power stored in increasingly low-cost batteries. That means they may need direct financial or policy support to pay for their rarely needed but critical role in keeping the grid stable.
Some of the state’s largest CCAs have formed a joint procurement authority to join forces in seeking out up to 500 MW of long-duration storage capacity. The group has received proposals for a variety of resources, ranging from pumped hydro, mechanical and compressed-air energy storage, to thermal energy storage from concentrating solar power and advanced battery technologies.
Geothermal power is the most likely source for the remaining 1 GW of long-lead-time resources the CPUC is calling for. In fact, an earlier version of the order called specifically for that resource, but it was shifted to allow for alternative technologies that could provide a capacity factor — the share of hours of the year that it can generate energy — of at least 80 percent.
California leads the country in geothermal power, with about 2.5 GW of capacity from the Geysers complex and 325 MW in Imperial County, where developers are exploring a dramatic expansion fueled in part by the potential to capture lithium from the brine of the Salton Sea as part of the process. But it may be hard to meet the CPUC’s 2026 deadline to build out that capacity and the transmission lines needed to connect it to the state’s grid.
(Article image courtesy of dirtsailor2003 via Flickr)
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