Federal and State Agencies Seek Policy Path to Grid of the Future

California is often a leader in policy innovation so it is perhaps appropriate that the quest for ways to make the electrical grid cleaner and more flexible is the next big issue for the Golden State. As renewable power increasingly comes into the system and older fossil and nuclear power plants retire, reliability challenges began to emerge. Some of the key questions California needs to answer are: which plants should we keep? What performance attributes do we need? Where in the system will those attributes do the most good? Can we retire plants we don’t need in an orderly way as cleaner resources including demand response scale up? Those are precisely the answers California utility regulators, the Independent System Operator and Federal Energy Regulatory Commission are trying to determine in a series of joint proceedings, beginning this week, under the rubric of a “Multi-Year Reliability Joint Proposal.”

Due to its size and the way the grid has evolved, there is a welter of regulatory and market players involved in sorting out how power and grid support services are purchased in California. The California Public Utilities Commission regulates which types of power California invests in; the California Energy Commission coordinates state energy policies and licenses for most new power plants, including natural gas and solar thermal generators; while the California Independent System Operator runs the grid and markets for reliability services that balance consumption and generation and ensure the lights stay on. Overseeing the System Operator is the Federal Energy Regulatory Commission, the nation’s electricity reliability cop who must approve any market tools the System Operator devises and state regulators bless. The solution for California will necessarily have roles for all four. Naturally they all want to maintain their own authorities and don’t want to cede too much power to their sister agencies even as they share a common vision for the grid of the future.

As you may expect, navigating these waters can be a complex undertaking. The good news is that the agencies are coordinating closely to find a solution that threads the market and regulatory needle of managing system reliability, greening the power supply and keeping costs for consumers as low as possible. 

Let’s take a look at what’s going on and where this effort is headed. 

Transforming the electric system

Traditionally, the electric system used continuously operating “baseload” power plants to meet utility customers anticipated demand. The generation was built to meet a maximum “peak” demand on the highest consumption level of the year.  A small number of power plants were built to pitch in when public demand for power neared the peak amount the system could generate. These plants became known, unsurprisingly, as “peakers.” They were expected to operate only a few times a year and for a relatively few hours and only when the system was under stress. They were often fairly dirty from a clean air perspective but they could start quickly to meet demand fluctuations. In these “old days” the supply was less variable than the demand for power, which was subject to frequent fluctuations. The system was designed (and is still operated) such that enough resources were built and were ready to operate as were “adequate” to meet the peak expected demand. 

Climate change and the rise of renewable power have changed everything. The cleaner power sources we are bringing into the system work extremely well and are very reliable. But the generation and the load it is intended to meet are both variable, meaning they fluctuate up and down based on a variety of factors like weather and the time of day. The new, more flexible grid depends on a combination of tools to keep the grid reliable while we make it cleaner. Foremost among them are energy efficiency and renewable power, especially wind, solar and geothermal energy. But newer tools are also in the mix of this flexible system, such as controlling the amount of power being used at peak times and employing electricity storage and flexible, mainly gas-fired power plants, to fill in the gaps. This more complex system is a challenge to operators, but both the technology and techniques to function reliably exist. As the grid gets more flexible, the rules governing the system also need to innovate by evolving both regulations and markets for reliability products (like ways to reduce consumption precisely when needed). Agencies often in competition with each other will also have to collaborate. 

Power plant retirement: problem or part of the plan?

Complicating the effort to build a flexible grid capable of meeting California’s goals for a cleaner electricity future is the fact that a significant number of nuclear and gas-fired power plants are coming out of service. This includes the mammoth San Onofre Nuclear Generating Station (SONGS), whose 2200 megawatts of capacity was recently retired permanently. SONGS was important for maintaining stable voltage in the transmission system so power can flow smoothly on the grid. But these services can be replaced using a mix of clean resources and more efficient plants that start and stop quickly.

In addition to SONGS, approximately 12,000 megawatts of coastal gas plants that use seawater for cooling and release environmentally-damaging heated water back into the ocean are slated for either redesign and repowering or retirement. Some of these “once-through-cooling” plants will definitely be repowered using air-cooled technologies but others are inflexible, too polluting, and fuel inefficient to be needed and are expected to be permanently decommissioned.  

NRDC’s view

Naturally we have an opinion on how this is to be done based upon principles that lead to a cleaner, more efficient, flexible and resilient grid. We submitted comments to the Federal Energy Regulatory Commission about the four agencies’ joint proposal. NRDC's comments, among other things, state that: 

  1. NRDC supports the California Public Utilities Commission and the California Independent System Operator staffs’ efforts to develop a joint framework for a Multi-Year Reliability Joint Proposal. It is essential to have the California Public Utilities Commission, California Independent System Operator and the California Energy Commission working together collaboratively to build the state’s clean energy future. 
  2. The state’s “loading order,” which prioritizes energy efficiency, demand response and renewables before new fossil generation, should be recognized explicitly as a key principle guiding the joint proposal’s further development. , and It should ensure that any new procurement mechanisms avoids creating new barriers to achieving the state’s loading order and the goals  of California’s climate law, AB 32. As we do this, we need to maintain our progress in attaining California air pollution reduction standards. And we don’t need to backslide on these goals to maintain reliability. 
  3. NRDC supports integration of flexible capabilities into California’s procurement framework to enable the state to rely on renewable energy for most of its future needs.

We believe the joint proposal is a good start to addressing a complex and challenging transition to both a cleaner and more reliable state transmission grid. Stay tuned.

My colleague Devra Wang contributed to this blog.