Are the California Blackouts a Sign of Things to Come?
- Aug 23, 2020 11:38 pm GMT
This past August 14 and 15, in the midst of a brutal heatwave, the California Independent System Operator (CAISO) made the difficult decision to implement a number of rolling blackouts because of insufficient power supply on the grid. Not including recent shutdowns of parts of the transmission system owing to the threat of wildfires, the state hasn’t seen such blackouts in almost 20 years. And those were a result of market manipulation by power arbitrageur Enron and others, as well as drought, and the failure to site, approve, and build additional generation. At some moments during the crisis which lasted from 2001 to 2003, there was reportedly a deficit as large as 3,000 MW.
In this case, the blackouts were the result of “a series of unfortunate events,” including massive and relentless demand for air conditioning, even in the late night and early morning hours; the unanticipated falloff of wind power generation when it was most needed; and the loss of natural gas generators. Aside from CAISO having an insufficient reserve margin, does this say anything, good or bad, about resource adequacy and the backing of renewables?
According to a feature in POWER Magazine, on Friday August 14 at about noon, CAISO issued a warning that the grid was in a condition of potential overload. At 3:00 pm PDT, almost 500 MW of generation went down. In response, CAISO dispatched replacement resources, and a couple hours later called on demand response to shed about 800 MW of load. Just past 6:30 pm, and still over-stressed, CAISO called on an additional 1000 MW of load-shedding by LSEs. About an hour and a half later, balance was restored to the grid. The next day, a steep upward spike in wind power generation ramped down backing generation. Unfortunately, a quick and steep downward spike in wind then removed about 1400 MW from supply. With peakers having ramped down, CAISO ordered 470 MW of load-shedding. Fortunately, wind power quickly returned and additional generation became available, restoring all load in about 20 minutes.
These relatively contained and relatively short episodes of load shedding were not catastrophic, but nonetheless cause massive disruption in affected areas during a crushing heatwave and shined a spotlight on the Achilles heel of generation reliability in California.
Well, there’s a lot of history here, both nationally and in California. First, the rapid expansion of shale gas drilling and harvesting has taken the price of Henry Hub natural gas, which has historically set the price of electricity, from $19.34 per MMBTU in 2005 to $1.77 in 2016 and around $2.45 currently. Conventional wisdom, now embraced even by many participating industry CEOs is that the IPP model has been handicapped, despite the creation of “YieldCos,” spinoff companies that securitize generation assets and receivables to separate—and insulate—them from other parts of the power business. Yet we still depend largely in FERC-regulated markets on merchant generators.
And in California, the political climate and environmental activism has also expanded renewable generation significantly, while not sufficiently backing up utility-scale wind and solar with fast-ramping gas generation, as it’s been done in other states. The closing of the San Onofre nuclear plant, several plants that use once-through cooling, and the denial by the California Energy Commission to site, build and operate new peaking plants contributed to the insufficient power supply on the weekend of August 14 and 15.
Some changes in the generation mix are inevitable, and positive. Without doubt, coal is on the way out, more due to economics and equipment life limits than hysterics, and it’s all but gone in the Golden State, with only a handful of coal-generated MW available. Nationally, according to the EIA, US power generation from coal dwindled to 23% in 2019. And that’s not going to change: between CCR and MATS compliance; the costs of financing, installing and operating backend controls such as SCRs, SNCRs and baghouses; new source review and PSD costs; parasitic loads; withering environmental opposition; and of course the price of gas, the death knell already rings in our ears. President Trump did not bring back coal because he could not, and while controlled coal will necessarily retain a place in the mix for a few years, coal generation has only one way to go: down.
At the same time, that generation will have to replaced as it goes, and it can only be done in large part and in the near-term future with gas-fueled, combined-cycle baseload and gas peakers. A lot of cynicism is attached to the notion that gas is the bridge to the future, but, really, what else is there? The rapid, unanticipated drop-off of wind power in California contributed in large part to last weekend’s blackouts, as it was insufficiently backed up with dependable, fast-ramping gas. An imperfect fuel, gas is nonetheless far superior environmentally and economically compared to coal, and with nuclear growth negligible, it’s what we have to work with as we strive to minimize CO2 and other criteria emissions. And it’s almost inconceivable that we’ll build any more nuclear for at least the next decade, given the cost, historically large budget and schedule overruns of two recent efforts, and continuing opposition to nuclear plant siting and operation as inherently dangerous, especially in densely-populated areas. Efforts by generators to build fast-ramp peakers have been thwarted, even, as in the case of NRG of New Jersey, in which its Puente, California plant, nearly already approved by the California Energy Commission to replace its Mandalay Station plant was abruptly killed. Ironically, one of the proposed solutions to a power deficit in the region is batteries. Yet today (8/21) at 9:25 am, according to CAISO, battery supply is 0.1%, or 31 MW.
To be sure, renewables will grow. There are massive and practical plans on the horizon, literally, for offshore wind in the relatively shallow waters of the northeast and mid-Atlantic “bight”, but those projects are still years from COD. In the deep waters of the Pacific coast, the challenges are far larger and the solutions much more expensive. In the wake of Covid19, these projects may now face less-certain financing and possibly, and ironically, diminished public support, with empty state coffers and the levelized cost-of-energy for offshore wind generation still well above conventional generation as well as the cost of terrestrial wind. And it, too, will need to be backed up with fast ramp gas.
California and other states can and should continue the march to a renewable future, but they have an obligation to ensure sufficient electricity supply even in the worst and least-anticipated of conditions. And they need to look at additional resources, such as the vast, untapped supply of geothermal energy and new hydro, and work to rapidly reengineer the grid to expand its capability and ensure that both dispatchable and non-dispatchable generation are better orchestrated now and in the years to come.
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