Enhancing resource adequacy

California, on its way to the reliable carbon-free electrical grid called for under state energy policy, has made notable strides related to resource adequacy in recent years.    

With the California Public Utilities Commission (CPUC) issuing a succession of large procurement orders, we have added thousands of megawatts (MW) of new clean generating capacity to the grid.

This includes unprecedented amounts of battery storage to help balance supply and demand during summer’s net peak, when the sun is setting and solar availability starts to decline when demand for power can remain high during hot weather.  

This progress was reflected in the ISO’s Summer Loads and Resource Assessment published in May. In that analysis of the CPUC’s Preferred System portfolio and the resource fleet expected to be online by the summer, we concluded that the ISO balancing authority went into the most challenging months of the year exceeding a conventional “one day every 10 years,” or 1-in-10, Loss of Load Expectation planning target.

The rapid pace of investments has allowed the grid to become stronger and more reliable. Despite some challenges at times during the last three summers, we have experienced no supply-related outages since 2020 even as demand for power continues to grow.

That represents several years of hard, focused work at the public policy, regulatory and operational levels — a solid achievement for our partners in state government, the utilities serving electricity demand, and the ISO.

Notwithstanding that notable progress, however, we know more work remains to make sure resource adequacy — as well as the ISO’s contribution to it — is fully up to the challenges of the next decade and beyond amid the changing RA landscape. As a result, the ISO has convened a stakeholder working group to refresh our resource adequacy practices and procedures.

Key drivers of the need for an RA refresh include:

• A generation mix that has been rapidly transforming since California’s resource adequacy program was established in 2006. While predominant generation types had been thermal, nuclear and hydro, the CPUC’s latest adopted resource plan for 2035 includes an additional 54,000 megawatts (MW) of renewable resources, 28,000 MW of batteries, 2,000 MW of long-duration storage and 1,100 MW of demand-response resources. These resources have operational characteristics and portfolio interactions that must be carefully assessed to inform the status of grid reliability and support effective procurement.
• Climate change impacts, including more severe heat waves and droughts, and an aging thermal fleet require a resource adequacy paradigm that recognizes the need for a range of dispatch capability and operating characteristics.
• The need to provide more consistent, transparent and timely information about the system-wide sufficiency of the ISO’s resource adequacy fleet required by policy makers, load-serving entities responsible for procurement, and entities considering joining California in expanded regional markets.

Because of these changed conditions and requirements, the ISO and its partners in the West are currently undertaking significant reforms to their respective resource adequacy constructs.

Within California, the CPUC and other local regulatory authorities have the primary responsibility for ensuring sufficient resources are contracted and available to the ISO to reliably operate the grid.

And the CPUC has developed reforms to its processes, including a “slice-of-day” resource adequacy program designed to ensure that load-serving entities procure sufficient resources to meet peak demand and charge system batteries after solar energy declines at the end of the day.

Specifically, the CPUC’s 24-hour slice-of-day framework requires each load-serving entity to demonstrate enough capacity to satisfy its specific gross load profile — including a planning reserve margin — in all 24 hours on the ISO’s “worst day” of each month. “Worst day” is defined as the day of the month that contains the hour with the highest peak load forecast.

Outside California, the Western Power Pool (WPP) has been working with numerous utilities and regulators in the West to begin the first regional reliability planning and compliance program that spans a significant portion of the region. The WPP’s Western Resource Adequacy Program (WRAP) is intended to address resource adequacy across a wide portion of the West, allowing participants to benefit from a more diverse pool of resources and to lower their reserve margins.  

The ISO, to keep pace with this shifting RA landscape and our changing climate, is using a stakeholder-guided working group and initiative to identify the best ways to enhance our resource adequacy program.

To date, we have held two working group meetings facilitated by outside consultant Jeff McDonald, who has significant expertise in resource adequacy and energy markets. The working groups provide an open, inclusive and innovative stakeholder-driven process for analyzing and refining proposed problem statements and principles which will be foundational to identifying needed reforms to our programs and processes. 

An RA Working Group Discussion Paper published in September identified three proposed problem statements to help focus our work. The first problem statement addresses the need for more transparent and timely information on resource sufficiency and expected performance. It also addresses the need to understand and take appropriate actions to consistently meet reliability targets based on the industrywide 1-in-10 standard mentioned earlier.  

The second problem statement recognizes that the ISO’s current requirements and program tools must keep pace with the evolving grid to ensure capacity is available when and where it is needed.

And the third problem statement addresses concern about inequitable costs and cost allocation among market participants and the need for a transparent and common framework for evaluating reserve margins and counting rules. This problem statement also recognizes the need for a clearer understanding of the contribution to overall system reliability by a local regulatory authority’s resource adequacy program.

With a tightening resource adequacy market and changing operational needs of the grid, we want to make sure the ISO’s various RA functions continue to work in concert with our local regulatory authorities (including the CPUC) to produce reliable and efficient resource adequacy market outcomes.

We look forward to continue engaging with our stakeholders through this working group initiative process to provide greater visibility into whether we have sufficient capacity and to improving our current resource adequacy requirements and processes.

The intended result of the RA Working Group process is to draft a Resource Adequacy Action Plan that will inform a straw proposal if market design or rule changes are deemed necessary. By updating how we address resource adequacy at the ISO, we can help create a more efficient and cost-effective method of ensuring adequate resources to meet demand, with appropriate incentives and rules needed for contracting and performance.

That way, customers will continue to benefit from the increased portfolio diversity within the region and the ISO will continue on the path spelled out in our vision statement from our 2022-2026 Strategic Plan, which is to “operate the world’s most reliable, cost-effective and environmentally sustainable power system.”