California has already postponed and even canceled plans to build new natural-gas-fired power plants in favor of distributed energy. But it hasn’t proposed to replace an existing power plant with them — until now.
Early this month, the California Public Utilities Commission issued a resolution that would direct utility Pacific Gas & Electric to open competitive solicitations for DERs — energystorage mostly, but with room for other carbon-neutral “preferred resources” like demand response — to cover the grid capacity and voltage needs now being served by three Northern California natural-gas-fired power plants.
Choosing which power plants are vital to keep the transmission grid running is the domain of the California Independent System Operator, not the CPUC. And the grid operator has designated the 580-megawatt Metcalf Energy Center south of San Jose, as well as the 47.6-megawatt Yuba River and Feather River generators as reliability must-run (RMR) resources.
These RMR contracts come with secure, high payments for running relatively few hours per year — mainly during hot summer afternoons when air conditioning loads surge, demand spikes, and CAISO struggles to maintain the reserves to cover potential emergencies. Calpine, the owner of the plants, said they aren’t cost-competitive without RMR, and intends to seek that status with federal regulators, having passed over opportunities to bid their energy or capacity into resource adequacy or bilateral agreements.
But California regulators argue that these must-run contracts are too expensive, and that distributed resources can replace them at lower cost to ratepayers. It also states that Calpine’s contracts failed to go through CAISO’s procurement process for flexible capacity, which could “lead to market distortions and unjust rates for power” in years to come.
That, the CPUC contends, gives it broad authority to allow solicitation of resources that can “fill local deficiencies.”
While the resolution doesn’t set a specific megawatt-hour target on what PG&E should procure, it does set some clear deadlines. If the resolution is passed, PG&E will have no more than 30 days to issue its first solicitations. Any resources the utility does procure will have to prove they’ll be ready in time to assure the RMR contracts won’t be renewed in 2019.
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