A severe heat wave brought high electric prices and rolling electricity outages to California last week, with as many as two million customers suffering a loss of power. Already, some are trying to politicize the blackouts, blaming renewables and California's aggressive energy transition. However, the situation is considerably more complex than this simplistic narrative.

While service reliability in the United States is generally high, weather events frequently cause outages and interruptions. Faced with an especially severe heat wave throughout the western U.S., California's electric grid is grappling with how to maintain service at a time of very high air conditioning usage.

Power sources, the state's regulatory structure, institutional responses and market design are all factors. Knee-jerk reactions and pre-prepared policy prognostications are an insufficient response to identifying the causes of the disruptions and developing solutions.

California's recent woes began near the end of last week, as severe region-wide heat led the grid operator to issue an emergency alert and conservation request warning about potential capacity risks. On Friday, as evening approached, solar generation began to fall as expected, requiring other resources to ramp up to maintain reserve margins. Managing periods during this time, the well-known 'duck curve,' is usually predictable and hence straightforward. However, with hot temperatures continuing into the evening, air conditioning needs remained high.

After a natural gas unit tripped offline, the California Independent System Operator (CAISO) issued a Stage 3 Electrical Emergency, and directed utilities, particularly PG&E, to begin load-shedding. By implementing rolling blackouts that impacted 200,000-250,000 customers per hour, overall grid reliability was maintained.

On Saturday, continuing heat and additional generation outages again led to implementation of short blackouts. With the heat-wave continuing, additional measures and outages could occur this week.

The principal cause of California's issues is exceptionally high electricity demand resulting from a region-wide heat wave. The entire West Coast is currently experiencing very high temperatures, with many places reaching over 100 degrees Fahrenheit. Although it has yet to be confirmed, Death Valley measured a temperature of 130 degrees Fahrenheit, one of the hottest recorded temperatures in human history.

The need for air conditioning means that load in California is near peaks last set during a 2006 heat wave. Such conditions not only strain the demand side, they can also stress generators, reducing plant efficiency and output. Related, the combination of extreme heat and ongoing wildfires has led to some of California's worst ozone in a decade.

In combination with this high demand, the proximate cause of the blackouts were generator outages. On Friday, a 500 MW natural gas unit tripped offline while another 750 MW gas unit unexpectedly remained out of service. On Saturday, the loss of a 470 MW gas unit combined with a 1,000 MW loss of wind power. Further, the regionwide nature of the heat wave is limiting the grid operator's ability to increase imports from out-of-state. One engineer noted that CAISO's reserve margins were relatively high during the rolling blackouts, suggesting that CAISO was being cautious in case of a generator or transmission line outage.

However, there are important and lingering structural causes that led to this operational situation. Resource adequacy standards for the U.S. require that the risk of a blackout be kept to 1-in-10 years. In its assessment of this summer's reliability, NERC evaluated California met its margin requirements, but noted risks related to low hydro and limited imports in the event of very high demand. Last year, the California Public Utilities Commission approved a 3.3 gigawatt procurement to ensure short-term resource adequacy, although new storage and other measures were not yet available this year.

Unlike other electricity markets, California does not have key features to ensure resource adequacy, such as capacity markets or well-developed demand response programs. Energy stakeholders in the state have debated for years how to maintain resource adequacy in light of the energy transition, with the state deciding only this summer to centralize decisions with utilities. Further, while CAISO implemented rolling black outs, Los Angeles and Sacramento, with their own grid operators and system procurement, avoided doing so.

It is important to note that rolling blackouts are an intentional risk response to strained grid conditions. Brief service interruptions for a few customers (relatively speaking) can ensure that a wider grid outage does not occur. The effects of an uncontrolled blackout during a heatwave can be deadly, potentially requiring days to restore service.

As an example, the massive 2003 blackout on the East Coast cut power to over 50 million people and cost tens of billions in economic damages.

California has gone almost 20 years without capacity-caused outages. In 2011, Texas suffered rolling blackouts during severe winter weather in February and only narrowly avoided them during severe summer weather in August. Beyond insufficient supply, weather events have caused major outages in Iowa, Texas, the East Coast, and other places, just this month.

Perfect reliability is never guaranteed and likely prohibitively expensive. Rather, electric system reliability and resilience is a compromise between performance and cost.

Nevertheless, context matters. These supply-induced outages are occurring during a global pandemic, which heightens potential risks to health and the economy from an uncontrolled outage. Meanwhile PG&E remains embroiled in one of the most challenging electric reliability controversies in the country: public safety shutoffs due to wildfires. The company only just emerged from bankruptcy related to the damages, following a multi-billion settlement.

Beyond wildfires, these outages appear to be the first supply-driven ones since the Enron scandal in 2001. During that incident, rampant market manipulation, resulting in part from poor market design, led to rolling blackouts for months. Ultimately, California customers ended up paying, as utilities signed expensive long-term contracts during the price manipulation, a major factor in why California has some of the highest electric rates in the nation.

Moving forward, an in-depth review of the proximate and structural causes of California's issues is needed to chart a new path forward. As extreme weather events become more common due to climate change, and the decarbonization imperatives drives the energy transition, existing and creative solutions are needed to ensure blackouts remain infrequent and short.

Humility and patience in diagnosing the grid's challenges are needed to navigate a new electric grid.