Cleantech Market Intelligence
California’s Timely Demand Response Roadmap
With the announcement by Southern California Edison that the San Onofre Nuclear Generating Station will be permanently closed, one would think that the California Independent System Operator (CAISO) – responsible for maintaining grid reliability for the world’s ninth-largest economy – would be alarmed. Not so, according to Steve Berberich, CAISO’s president and CEO.
Berberich points out that CAISO will rely upon flexible capability resources such as demand response (DR), which can offset rising demand for power by timely reductions in loads based upon smart grid technology, to help fill in the gaps. In fact, DR will be vital to not only replacing the 2,200 MW of the now shuttered San Onofre plant, but to help integrate substantial new renewable energy capacity necessary to meet California’s renewable portfolio standard (RPS), which calls for 33% of the state’s power to be supplied by renewable sources by 2020.
Coincidentally, CAISO released its first draft of its long awaited research roadmap on DR earlier this month. DR is a lower cost option than adding traditional supplies to the grid, but carries its own set of risks, especially in a market as large and sophisticated as California. The roadmap lays out a vision for how California can integrate utility DR programs into wholesale markets, reducing the need for relying upon fossil generation to fill in gaps when the sun doesn’t shine and the wind doesn’t blow.
While California has often been seen as a cutting edge leader on energy innovation, the initial failure of the state’s effort to deregulate retail markets that resulted in the infamous rolling blackouts of 2001 has put the state at a disadvantage in pursuing DR. Consider the following: none of the over 2,300 MW of available load reduction capacity created by state utility reliability and price-responsive programs – different kinds of DR resources – participated in CAISO markets in 2012. This is in stark contrast with the Pennsylvania-New Jersey-Maryland (PJM) balancing authority, which has significant third-party DR participation, with over 5,463 MW secured in its most recent auction to provide capacity over a 1-year period ending in May 2017.
Of course, many of these DR resources deployed in PJM are backed up by diesel generators, which would not comply with California’s tough air quality regulations, and therefore are not applicable here. But without a deregulated retail market, CAISO is forced to seek alternative means of addressing the most aggressive goals in the country for large- and small-scale renewables (as well as electric vehicles), while also phasing out a fleet of 6,000 MW of natural gas plants that rely upon ocean water for cooling. DR, along with microgrids and virtual power plants (VPPs), will be vital to efforts to reach these lofty goals while also keeping the lights on.
CAISO is seeking stakeholder input because it is not in full control of its own destiny. Historically, CAISO has relied upon the California Public Utility Commission (CPUC) procurement processes for each of the state’s investor-owned utilities to address the state’s peak demands for electricity. The planning processes used by the California Energy Commission to estimate energy efficiency gains are also different than the CPUC’s, adding more complexity and uncertainty to the resource adequacy calculations.
Earlier this month I attended the first conference put on by Ventyx, a software pioneer purchased by Swiss industrial giant ABB. The focus of the conference was on how on the software of Ventyx and the hardware of ABB will help enable IT/OT convergence necessary to translate the hype surrounding the smart grid into near term business value, including integrating DR into markets with high levels of renewable energy. The organizers probably didn’t think about it in this way, but the timing was ideal, given the San Onofre and CAISO announcements that same week.