During the 2 p.m. hour, renewables served more than 70% of power demand, setting another record in California.
Source: CAISO: Renewables served 42% of California demand on May 16, setting record | Utility Dive
California’s investor-owned utilities (IOUs) have asserted that the underlying costs molding time variant or time of use (TOU) rate structures should be largely, or even exclusively, derived based on conventional fossil generation costs. The IOUs rely on “net load” to determine TOU prices, calculated by subtracting all load met by renewables, nuclear and hydropower generation—the majority of the utilities’ generation fleets.
In theory, net load is the portion of the load served by fossil-fueled generation that has the highest short-run operating costs, and therefore is “marginal.” The infamous “duck curve” shown above depicts the net load (not the metered load.) Yet, the marginal energy generation for most load is no longer served by natural gas; it is now met by renewable energy contracts. The utilities’ net load approach ignores the bulk of their true marginal costs to serve added load, which arise from procuring renewables.[1] The IOUs’ resource procurement has been dominated by adding solar, wind, biofuels, and other renewables since at least 2006 to meet the state’s renewable portfolio standard (RPS), first at 20 percent, then 33 percent, and soon 50 percent.
The tunnel-vision focus on net, rather than the entire, load is especially problematic in the context of State policy to phase-down fossil fuel generation. Eventually, natural gas production will even more significantly diminish, and could disappear from the grid entirely, leaving no price-setting metric under this paradigm. Insistence on the net load approach in the face of this transformation is akin to evaluating the economics of ridesharing based on the exclusive cost of taxis, without consideration of Uber® and Lyft®.
Once fossil-fuel resources are used minimally – an explicit state goal reflected in SB 350 – and potentially no longer on the margin, it is unclear what price benchmark the utilities will propose to set time-variant rates. Continuing the trend toward fewer fossil-fuel resources is already reflected in pending legislation in Sacramento that proposes a clean-peak standard – AB 1405[2] – and a 100 percent Renewable Portfolio Standard—SB 584.[3] Relying solely on the cost of generation resources that State policy plans to phaseout to define TOU periods is inconsistent with good, long-term, ratemaking principles. Instead, marginal energy generation costs should be calculated, at least in part, from a set of recent RPS-eligible PPAs, weighted by time of delivery.
Likewise, the marginal energy costs derived using the net load method, which drive the proposed shifts in TOU periods, reflect less than one-third of total average utility rates. The IOUs do not explain why cost differences within a modest component of overall rates should steer determination of TOU periods.
Further, it is not clear why the California Public Utilities Commission (CPUC) should rely on a speculative forecast about load shapes in 2024—seven years from now—to set today’s TOU periods. As the CPUC is well aware, the electricity system is changing rapidly along many dimensions. Infusion of utility-scale renewables, which is driving the IOUs’ rate analyses, is but one factor. Increasing amounts of storage and electric vehicles, shifting work patterns, and other social and economic factors will substantially influence load profiles over the next decade. In 2006, few energy experts foresaw stagnant, or even falling, electricity demand; there is even greater uncertainty today.
[1]This perspective excludes contributions made by utility-scale renewables that meet most of the remaining load, and by customer-side resources.
[2] See http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1405
[3] See https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB584
The proposal would eliminate allowance banking and offsets, and add a border adjustment mechanism. This would isolate California from global efforts to mitigate GHG emissions.
A good explanation of how regulation differs from litigation, and how California’s water rights differ from other systems.
Source: Learn Liberty | Blame outdated rights for California’s water woes.
Solar and wind power combined also hit a peak on the same day by serving 49.2% of demand.
Source: CAISO notches record, serving 56.7% of demand with renewable energy in one day | Utility Dive
Over the last year, various states have introduced subsidies and preferences for different electricity resources that have circumvented the independent system operator (ISO) markets that the Federal Energy Regulatory Commission (FERC) approved in the 1990s. FERC’s intent was that hourly markets would provide all of the price signals needed to induce appropriate investment. As we’ve found out in California, that hasn’t worked out that way. These markets have difficulty conveying the full price information for all services (in part because many utility-owned generators are subsidized through state rate of return regulation) and the environmental and technological benefits that may be difficult to monetize in an hourly price.
FERC has challenged some of these new rules, and both won and lost in the courts. Now the market monitor in the biggest market in the U.S. that covers the Northeast and Midwest is joining the fight. If the market monitor wins, this will raise the salient question of whether FERC needs to rethink its policy, or will states begin to withdraw from the ISOs to pursue their own policy goals?
The market monitor argues the state’s subsidies “unlawfully intruded” on FERC’s authority over wholesale interstate electricity sales.
Source: PJM market monitor opposes Illinois nuclear subsidies | Utility Dive
We just looked at the frequency of different water conditions over the last 15, 35 and 110 years. Over the longer period, wet, “normal” or average, and dry years have occurred in about equal shares, at about one-third each. But over the last 35 years dry conditions have occurred in about half of the years. Over the last 15 years, wet conditions have declined to less than 20% of the years.
We’re also working with Sustainable Conservation on a program that will incentivize growers to use diverted floodwaters to recharge groundwater aquifers below their fields.
California is likely to see more extreme floods and drought with climate change, but the state’s water infrastructure may not be ready.
Source: California’s Water System Built for a Climate We No Longer Have | KQED Science
Competition from cheap natural gas generation is again the reason behind the second major coal closure announcement in a month.
Source: Utilities vote to close 2,250 MW Navajo plant, largest coal generator in western US | Utility Dive
By Richard McCann
Why are we not using Davis’ wealth of human capital to our advantage? Why don’t we assign, and even hire or retain, these individuals to prepare these analyses for commission review?
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