First summer report on market performance released

The California Independent System Operator (ISO) has released the first of four monthly reports assessing how its markets perform over the summer, with an archived video of an August 2 stakeholder call about the report’s main findings available here.

Similar customized reports will be published throughout the summer months as the ISO provides transparency about the electrical system’s performance from June through September, when system conditions are particularly constrained in California and throughout the Western United States.

The reports are a follow-up to the Root Cause Analysis released jointly in January by the ISO, the California Public Utilities Commission and the California Energy Commission after the ISO ordered rotating outages last August. The short outages over two days were needed to balance electricity supply and demand during a regional heat wave that shattered high temperature records across the West.

As the 94-page report for June points out, the ISO has implemented four elements of a Summer Readiness initiative aimed at implementing market enhancements to help ensure grid reliability during emergency conditions.

Those elements were:

• Make-whole incentives for hourly imports during tight system conditions
• Real-time pricing of use of contingency reserves at the bid cap
• Adding an uncertainty component to the capacity test requirements in the Energy Imbalance Market (EIM), and
• Improvements to the management of storage resources under resource adequacy requirements during tight supply system conditions.

Among its other conclusions, the report shows that Flex Alerts called in June 2021 “resulted in hourly load reductions from 77 to 735 Megawatts (MW) during the peak hours.”

Those calls for voluntary consumer conservation, typically from 4 p.m. to 9 p.m. when demand remains high on hot days as solar energy is declining, have helped maintain overall grid reliability.

Also noteworthy are the report’s findings that reduced hydroelectric resource adequacy capacity from the drought left California’s electrical grid with 670 MW less power than was available in June 2020.

However, the report stated, 460 MW, or about two-thirds of that loss, was made up with new power from battery storage resources being added into the grid.

June saw extreme heat across the Western United States during two prolonged stretches. The first heat event occurred from June 12 through June 20, affecting California, the Southwest, and Northern Mountain West regions. The ISO issued Flex Alerts on June 17 and 18 and consumer conservation helped avoid the need for outages.

On those Flex Alert days in June, the ISO’s load exceeded the June 2021 forecast of 40,629 MW used in resource adequacy programs. Because aggregated temperatures in the ISO system rose 10 degrees above normal, demand on the grid exceeded that forecast for four hours in June 2021.

As the June report states: “Resource Adequacy (RA) capacity available in the market was generally sufficient to cover actual load needs. Only two hours after the gross peak were not fully covered by RA capacity, which was covered by above or non-RA capacity. Non-RA capacity available in the market was consistently over 4,000 MW through the month, and was supported by both internal supply and imports.” RA capacity refers to power under contract to utilities as required by the state’s RA program.

The ISO market’s prices for energy diverged across markets during the heatwave of June 14 through June 18. Real-time prices were lower than day-ahead prices during that time, mainly during peak hours of the day.

“This is partly attributable to the day-ahead market having procured more supply capacity to meet projected high loads that did not materialize in the real-time market because of cooler than forecasted temperatures along the coast, reductions in actual load because of energy conservation and demand response, in addition to the incremental adjustment to the load forecast in the day-ahead market,” the report states.

California also received crucial amounts of imported electricity from the ISO’s Western Energy Imbalance Market (EIM), according to the report, with about 4,000 MW imported during peak hours on June 17.

Those imports came from multiple areas, including adjacent areas and also from farther reaching areas. During the second heatwave that struck the Pacific Northwest, similar benefits materialized with Western EIM transfers going into the Pacific Northwest entities. The transfers reflect the economic and operational benefits that the Western EIM offers to participating entities by maximizing supply diversity.

Work on the monthly reports is led by Guillermo Alderete Bautista, the ISO’s director, Market Analysis & Forecasting, along with his team in that division. The report for performance in July 2021 is scheduled to be released in the second half of August.