Investor-owned utilities, community choice aggregators and other load-serving entities in California will soon need to show they have sufficient capacity cushions to meet the electricity demand of their customers during all 24 hours of the California ISO's most stressful days.
The California Public Utilities Commission approved the new rules April 6 as part of an ongoing reform of the state's resource adequacy program, which was begun after the state experienced back-to-back days of rolling blackouts in August 2020.
California, which has continued to experience grid emergencies, will test the new "24-hour slice-of-day" resource adequacy model in 2024, according to the decision. Absent any significant issues, it will go into effect in 2025.
"The intent and the hope here is that we will have improved understanding of our needs in each hour and therefore improved reliability as a result," Seth Hilton, a San Francisco-based energy regulatory lawyer at Stoel Rives, said in an interview.
Under the rules, PG&E Corp. operating arm Pacific Gas and Electric Co., Edison International subsidiary Southern California Edison Co., and Sempra Energy utility San Diego Gas & Electric Co., as well as community choice aggregators and other load-serving entities, will be required to demonstrate they have enough capacity to satisfy demand all hours of the California ISO's "worst day in that month." The regulation defines "worst day" as the day of the month with the hour containing "the highest coincident peak load forecast."
'More complicated' for renewables
The new system will change how renewable energy, energy storage and other resources are valued for providing resource adequacy. Those changes "may be more complicated for resources that see some variation ... like solar or wind," Hilton said.
In meeting their demand and reserve capacity requirements with energy storage, an increasingly important resource on CAISO's most difficult days, load-serving entities must "bring enough extra capacity to serve their own batteries," according to the decision.
The new rules will have an impact on contracts for plant output in terms of "what obligations are imposed on these resources and how much capacity they have available," Hilton said. But the attorney, who represents clients participating in California's energy markets, does not expect the new rules to affect demand for renewables or energy storage in the state.
"We need a lot of capacity in California," Hilton said, pointing to a recent PUC decision to add 4 GW to a landmark 2021 order for procurement of 11.5 GW of new clean energy resources.
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