California’s power resource challenge holds lessons for clean energy transitions worldwide

For the first time in 19 years, California’s power system’s operator, the CAISO, took the decision in August to order utilities to shut off the power to certain groups of customers – or load shedding, in the technical jargon – as a last resort measure to prevent a complete system collapse.

Although the relative amount of load shedding was small compared to total demand (0.1% of electricity consumed during the two days), some customers across the state were forced to endure record temperatures without air conditioning during one and a half hours over two days. This was followed by two more days in which calls to customers to voluntarily restrain electricity demand prevented further power rationing.

Demand was kept below all-time records only through the extraordinary efforts of Californians to conserve energy. Three weeks later, on September 5-6, these calls were again instrumental in reducing stress on the grid, this time caused in part by wildfires.

These events constitute a “yellow light” that would provoke a healthy reassessment of the electricity security framework in any power system. But for California, this review might be stricter. California has made impressive strides over recent years to bring on renewables, and has an ambitious target of 60% (mostly non-hydro) renewables by 2030. Therefore, what happens in California will be followed not only by local officials, but also by policy makers and mainstream media globally.

The Governor of California has committed to undertake a full accounting of the underlying causes of the event. While this inquiry is expected to provide more definitive answers, currently available information points to a number of contributing factors, such as high demand coming from sustained near-record temperatures; lack of imports as demand increased simultaneously in neigbouring states; and generation and transmission outages including the loss of major gas fired units.

While the evidence is being considered regarding these contributing factors, energy system operators worldwide can learn lessons from California’s experience. Three areas in particular deserve attention: 1) the current planning framework and the mix of demand and supply side flexibility sources it considers, 2) the regional co-operation framework, and 3) the resilience of the power system to extreme weather events. All of these are areas where the IEA is working extensively.

There is no doubt that power systems can and should rely on renewable sources to satisfy increasing shares of energy needs, and that as always there is a need to ensure that the power system is equipped with the capability on the supply and demand side to meet its resource adequacy standard. What is the mix of resources that can ensure this in the short and the long term? The events of the past month show the need to keep flexibility on the supply and increase it on the demand side. Price signals need to be more emphasized to indicate where and when energy is valued on the system, and send timely signals for investment decisions.

Although California has mandated 1 300 MW of storage to be built by the end of 2024, only 500 MW are currently available. It is also remarkable that 9 800 MW of gas-fired capacity over the past five years have been retired, while only 3 800 MW have been added. On net, this is a drastic reduction in a key source of dispatchable and flexible capacity. Moreover, Diablo Canyon, the only nuclear plant left in the state with 2 256 MW of capacity – a low emission dispatchable source – is to be retired in the near future as well.

Even if it is clear that other non-conventional sources such as batteries and smart EV charging have a great deal of potential to contribute to system adequacy, this has not yet been realized. Dispatchable power plants have long provided the bulk of flexibility in power systems around the world, and most, including California, will continue to rely on them to support resource adequacy while other options become operational and economically viable.  

Further policy action is needed to fully unlock the potential of demand-side measures. As we have already seen, voluntary demand reductions have played a major role in avoiding rolling blackouts in the past month. This is in part a success story of the consumer’s response to emergency calls for conservation in California. Strengthening incentives to deliver customer response when needed can more systematically and predictably unlock this potential, providing added certainty to the system operator and compensating customers for their role in keeping the lights on. Necessary technologies already exist– smart meters are in place in most California homes. California has one of the world’s most advanced policy regimes for energy efficiency, and is well placed to take full advantage of the potential smart demand-side response via digitally driven automation, including smart charging of the increasing EV fleet.

Regional integration should be considered as one of the tools to maintain reliable and flexible operation of the power system. Lack of imports during times of stress should be interpreted as a call to have a broader vision about the capacity contribution of those imports and correlation of weather patterns, which requires more co-operation at the planning stage. European experience on this regard is very illustrative, where probabilistic adequacy assessments consider many countries simultaneously, helping to better understand the challenges in stress periods that may affect various regions. In addition, at the operational stage, current methods to manage regional interchange between neighbouring systems create frictions that preclude some beneficial exchanges from occurring, which can be remedied through joint dispatch based on economic and security-based principles. 

Planning for extreme weather events and climate resilience needs greater attention. This risk of a widespread heat wave such as the one that occurred in August or the risk that wildfires impose on the availability of system assets needs to be assessed for both probability and impact. It is important to remember that the amount of unserved energy in 2019 due to wildfires was 30 times larger than the events of the last month, and affected essential services. In situations where science tells us that risks will increase, there is a need to act with urgency and to update planning accordingly.

Policymakers have the tools to respond to the challenges associated with ensuring electricity security during the energy transition. Large shares of variable renewables bring new challenges that can and must be taken into account. Power systems around the world have successfully integrated rapidly growing variable renewable sources and achieved stable electricity supplies. We need to bear in mind, however, that such success has relied upon plenty of conventional generation capacity built in past decades. Whether or not power systems can secure needed flexibility and capacity going forward is another question. The IEA’s World Energy Outlook points out that flexibility requirements in power systems will grow much faster than growth in electricity demand. On the other hand, the World Energy Investment Outlook sends a warning that investments in networks and flexibility sources have been in decline in recent years, and are likely to further decline with the difficulty from the Covid-19 pandemic. Market design should improve to properly reward flexibility and capacity contributions to the system and to ensure the right level of investments.

Power systems will need more flexible sources to integrate more variable renewables to fight against climate change, and climate change is already leading to more extreme weather events and increasing challenges for electricity security. Power systems also need to become smarter with digital technologies, while also taking on the challenges associated with cyber attacks.

That is why the IEA is now working on a new report on electricity security, and plans to release it at the IEA’s second System Integration of Renewables Ministerial Meeting which will be held in the final week of October during the Singapore International Energy Week.