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  • jagoronm

California's Decarbonization Challenge

Updated: Nov 16, 2020

The harrowing events in California recently has raised several questions on energy transition:

1) Is the California situation inevitable?

2) What are the options available for resource adequacy?

3) Is the system and resource planning flawed? What needs to change?

4) Are there similarities with the German energy transition?

The energy transition discussion gets charged with strong ideological positions on climate change that makes it practically impossible to have unbiased assessments. The path to a decarbonized world is fraught with complexities and challenges. It also creates winners and losers. When bias gets in the way, it is natural to be selective and self serving in overlooking the barriers, and the interdependencies of markets, policies, technology, financing and organizations. Aspiring for an honest and realistic approach is a utopian dream at this stage, as energy transition is viewed through rose colored glasses even by important institutions. With this grain of salt, here are my thoughts on the California situation.

Capacity shortages not adequately addressed:

If the reported shortages of 8,000 - 10,000MW is true, there is no question that there is a gap in system planning - either the shortfall scenarios has been ignored, or there was wishful thinking that the situation wont happen in reality. Capacity requirements and reserve margins have been central to reliability planning. NERC since the 1960s in its various incarnations has played an oversight role ensuring system reliability under various contingencies. When the majority of generation comes from nuclear and fossil (coal, oil, gas), the planning function guides capacity, protection, and stability planning. With large machines running, system inertia is in place providing ample margin for dynamic and transient stability. With non-dispatchable renewables, the capacity gap becomes more dynamic. Control and response times become critical to get the resources ramp up or down. New automation and digitization technologies are need for control and system stability. These technologies are the new engines of growth, buzz, and hype. It is no surprise that more traditional capacity related questions - retirement of nuclear, market clearing of gas plants, import of coal power, and building new transmission lines are de-prioritized and even lost in the hype. They easily fall out of favor compared to digitization and automation discussions. There is also a disincentive in play: - 1) raising concerns that addressing capacity via traditional means would slow down the adoption of renewables and in turn slowdown the decarbonization agenda, and 2) the opportunities for growth that many companies - manufacturers, software vendors, system integrators relied on, take a back seat hurting their commercial growth agendas.

Resource adequacy and Flexibility are two distinct problems:

Resource adequacy and flexibility issues are often treated together. There has been a lot of discussion of the duck curve and how to ramp up generation quickly. What has been overlooked is where the capacity is going to come from as the caseload or the pond gets shallower. More importantly what would be viable - economically. Once the low marginal cost renewables are off, then the obvious choice is either peaker plants, or import from the neighbors to fill in the gap. These higher marginal cost resources would give the generation supply an upward slope with an abrupt just. If those supplies are at risk, flexibility will not be enough to clear the demand. Thats what happened with wildfires and outages. Such a scenario is plausible and was overlooked in planning. The decarbonization proponents presented batteries as the alternative, which is far from practical at the scale to cover the 8000-10,000MW shortfall. Flexibility often gets loosely used as resource flexibility - which is the availability of portfolio of resources to be deployed under changing dynamic and transient conditions. Batteries can provide the flexibility but the flexibility and capacity provisions of the batteries are two distinct problems and both need to be addressed. And batteries are not economical at scale to fill capacity gaps. These issues were not brought into the forefront and considered well because there is no viable solution other than the nuclear and fossil to close the gap in the near term. This goes against the grain in which the decarbonization program was executed.

Feasibility of Battery and Energy Storage solutions:

If those at the helm of affairs honestly had asked for the right capacity questions, then there is a possibility of finding workable options and tradeoffs. If the policies become overly dictated as currencies of political capital, we end up with gross imbalances and misalignments. California has relied on technologies that are not ready and hoped for unrealistic confluence of external expectations to occur, denying the likelihood of scenarios that goes contrary to the climate change positions. For instance, when the California policies delivered clean energy goals early, thanks to the the subsidies (includes, tax rebates) and mandates for state’s utilities, they ignored the holistic picture and the fact, that the system planning and capacity equation was misaligned. It is collective responsible of all the stakeholders for the current disruptions in the system. One can argue how much of that responsibility lies with one of the major constituents - the big utilities. Should the PG&Es and SCEs have pushed back on the policies? Should they have fought hard to keep the gas plants on until the battery storage and other alternatives become practically feasible? Did they do a proper system readiness and commercial viability assessment at scale? Did they fully explore the outcomes offered by community aggregators and non-wires alternates like demand response? Will demand response based on a voluntary participation work? Are the customers willing to pay several times more for battery storage? These questions are not getting enough attention, and if they are, partisan takes over the discourse.

Learning the “right” lessons from Germany:

The US press in particular has been critical of the German energiewiende (energy transition) program. This misses some key facts that offer important lessons. Just as a prelude, certain points don’t get much attention:

- most people in Germany support the transition,

- the industrial sector was spared from the surcharges

- the country imported electricity when the renewable generation was sufficient

I do not want to diminish that there were many things that did not work as well. The largest utilities RWE and E.On lost large part of their market capital and had to restructure. Such changes are not painless. However learning the relevant lessons can be beneficial.

The German grid’s reliability was not compromised in a way that happened to California. A large part of that has got do with the fact that lignite and coal resources were not prematurely retired. Now granted that might change as many of these plants are going to be retired over the next few years. The easy import from neighboring countries might also be harder as those countries increase their renewable footprint. But safe to say that with a pragmatic view on fossil fuels, the reliability in Germany remains an order of magnitude better as measured by customer minutes interrupted even when the percentage of renewables in electric consumption grew enormously. This also keeps the dingy transition alive and march towards a goal.

Transition is not an overnight phenomenon. It requires a bridge to shift from one operating mode to another, and a bridge is needed from nuclear and fossil based to renewables and batteries. California would be better served by casting its clean energy ambitions with greater pragmatism and be willing to making tradeoffs. In this case, being open minded and deliberate about a bridge resource to the renewables. It might be that require Diablo Canyon nuclear to run a little longer or investing in gas resources. It may be even worthwhile to harden or build transmission lines.

Without understanding and applying a holistic mindset, the state has been robbed of opportunities and now the credibility of conducting an energy transition in a responsible manner hangs in balance.

Indeed where we are, is the California approach has hurt the credibility and perhaps has done more harm than good to the decarbonization agenda.

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