Dive Brief:

• Regulators in California authorized a suite of demand and supply-side strategies to prevent blackouts during the summer months at a meeting on Thursday, despite concerns that the plan would include back-up diesel generation.
• The proposal unanimously approved by the California Public Utilities Commission (CPUC) would implement an emergency load reduction program to encourage customers to reduce their usage during grid emergencies. But the pilot will also compensate customers if they do so using fossil fuel resources like diesel back-up generators.
• Regulators, however, say that the program is a last-resort measure. "We've developed a number of programs and proposals, some we hope to never have to use," CPUC President Marybel Batjer said at the meeting. "However, we have tried to plan to have options for the most difficult scenarios, if they happen to arise."

Dive Insight:

California energy agencies have been moving quickly this year to prepare the grid for the summer months, after a heatwave last year forced the state's system operator to initiate rolling blackouts. In February, regulators instructed utilities to contract additional capacity for this summer; that decision resulted in around 565 MW of incremental capacity, according to Batjer, but environmental groups have raised concerns that, contrary to California's climate goals, it also opened the door for fossil fuel generation.

The most recent decision is more focused on demand-side measures including the state's new emergency load reduction program, which regulators view as "a layer of insurance" over the additional measures being taken to support the grid. But the inclusion of "prohibited resources" — like back-up diesel generation — in that program has worried some, since it would essentially compensate customers who remove themselves from the grid and turn to resources like diesel generators during emergencies. 

The Bay Area Air Quality Management District also opposed the load reduction program on these grounds. There are approximately 10,000 internal combustion engines permitted in the Bay Area and the district receives around 400 engine permit applications per year, Bay Area district climate advisor Jakub Zielkiewicz told the commission on Thursday. Data centers alone currently use 1.2 GW of diesel back-up generators, many of which are located in disadvantaged communities that already have poor air quality.

The CPUC this week modified its initial proposal in response to some of these concerns, by preventing prohibited resources — which also include gasoline, propane and liquefied petroleum gas — from being compensated during "test" events. The agency also said it would take another look at modifying the program to minimize diesel use in 2023 through 2025. In the meantime, utilities are required to collect data on the kinds and capacity of back-up generators that are pitching in during emergencies. 

However, the commission opted not to exclude diesel generators from the program at this point, although commissioners said they too had concerns about the air quality and climate change-related implications. 

"Let me underscore, there will be back-up generation only if needed as a last resort only, and likely for minutes, hours — not multiple days," Batjer said. 

But analysis from the Bay Area's air district has shown that many data centers operated diesel generators for multiple emergency events last summer, and one facility ran them for approximately 400 hours, according to Zielkiewicz.

"The notion that back-up generators are seldom used is a convenient but misleading argument," Zielkiewicz said. "With the proliferation of these fossil diesel generators and their greater use associated with emergency events, we can expect continuation of adverse air quality, public health and climate impacts."

Regulators also said the emergency program would not detract from California's broader clean energy goals. 

"I know that these packages don't seem to be a building block, but I think it's important for the public to know that we're just as committed as before and we have these other venues where we're discussing the acceleration of meeting those goals," such as the CPUC's integrated resource planning rulemaking, Commissioner Martha Guzman Aceves said. 

But groups like the Union of Concerned Scientists (UCS) and others feel the decision doesn't go far enough to prevent diesel generation during the summer months. The commission should not use ratepayer funds to pay customers to use diesel generation, Zoe Woodcraft, a spokesperson for Earthjustice, said in an email.

"Diesel pollution is incredibly harmful from a public health standpoint," Woodcraft added.

Concerns have also been raised about the supply-side measures in the decision, including directing utilities to procure up to 1,500 MW of resources for 2021 and 2022. The initial version of the proposal allowed utilities to look into redeveloping or repowering existing fossil fuel generation but after parties protested this, regulators reversed course.

But this does not eliminate the possibility of using fossil fuels to fill that 1,500 MW goal, said Adenike Adeyeye, senior analyst and Western states energy manager at UCS.

"It is prohibiting totally repowering an old facility that had closed, so that's positive, but it still will allow for incremental efficiency improvements or incremental generation at facilities that are operational now," Adeyeye added. 

The CPUC is moving too slowly to build clean energy at the scale required to address the climate crisis, said Katherine Ramsey, staff attorney at Sierra Club, in an email. And while regulators have voiced their preference for using energy storage resources to meet these procurement goals, "the utilities are just as likely to make new, multiyear investments in gas capacity," Ramsey said.