UPDATE: February 24, 2023: The California Public Utilities Commission on Feb. 23 ordered load-serving entities in the state to procure an additional 4 GW of Net Qualifying Capacity in addition to the 11.5 GW it ordered in June 2021. The commission also approved four energy storage contracts totaling 372 MW for Southern California Edison to meet part of its mid-term reliability procurement requirement. The 4 GW “of additional procurement for 2026 and 2027 is in response to the increasing and accelerating impacts of climate change, and updated load forecasting from the California Energy Commission that suggests that electricity demand is increasing and will continue to increase compared to when the CPUC adopted its 2021 decision,” the CPUC said. The additional capacity also accounts for “the updated anticipated retirements of some additional fossil-fueled generation resources, as well as the likelihood that the previously authorized long-lead time resources will need additional time to be brought online,” the commission added.

Dive Brief:

• The California Public Utilities Commission is considering asking electricity providers in the state to procure 4 GW of new capacity to ensure grid reliability, in addition to the 11.5 GW of procurement the regulators ordered in 2021.
• The additional capacity is required for a variety of reasons, including updated load forecasts that suggest electricity demand is increasing more than previously expected, the impacts of a changing climate, and the likelihood that more fossil fuel plants will be retiring, according to the agency.
• “The more that California can invest in [the] near to mid-term in clean energy resources, and then fine tune how much we need later, I think is going to be a better result for customers… [and] the decarbonization transition,” Michael Colvin, director of regulatory and legislative affairs at the Environmental Defense Fund, said.

Dive Insight:

In June 2021, the CPUC approved an 11.5 GW procurement package of clean energy resources to come online between 2023 and 2026, in order to replace the then-planned retirement of the 2.2-GW Diablo Canyon nuclear plant as well as a series of natural gas plants slated to retire. Regulators ordered power providers to bring online 2 GW of resources in 2023, another 6 GW in 2024, and installments of 1.5 GW and 2 GW in 2025 and 2026, respectively. 

However, circumstances have changed since that initial order was approved, regulators say. New forecasts point to increasing electric demand, beyond what regulators initially anticipated, likely due to extreme weather, a greater expected increase in electric vehicles, higher usage of air conditioning, and electrification of the built environment. At the same time, California expects to have less access to imported electricity from its neighboring states, as they face similar trends.

Accordingly, the CPUC’s proposal would have power providers procure an additional 4 GW of resources, to come online in 2026 and 2027.

In the last six months or so, California has experienced reliability challenges due to high temperatures in the summer, as well as devastating storms and atmospheric rivers that have played havoc with the electric grid, Colvin said. 

“It took everything in our arsenal to be able to [keep the lights on], so bringing new resources online makes it so that we’re not in an emergency situation,” he added. 

Power providers are, however, facing challenges in bringing new electricity resources online, in part due to supply chain crunches following the COVID-19 pandemic. These supply chain constraints are likely to have knock-on effects, according to Colvin.

“[W]e were really compressed for a while and we’re still playing catch up,” he added. 

One benefit, however, of requiring additional procurement on this timeframe is that it coincides with the availability of clean energy tax credits approved by the passage of the Inflation Reduction Act, according to Colvin. 

“We end up saving a fair amount of money for customers by making investments during this timeframe. So even if we don’t need every single last megawatt of power right then, we’re still going to be achieving this leverage because of these tax credits,” he said. 

Broadly speaking, Sierra Club is glad to see the CPUC ordering more clean energy procurement, “because we know the state is going to need significant renewable energy buildout to reach our 2030 climate targets,” Katherine Ramsey, senior attorney with the organization, said in an emailed statement.

While Pacific Gas & Electric is still in the process of reviewing the details of the proposed decision, “we believe the conclusion to be consistent with our internal analysis on system reliability needs. We share the Commission’s urgency regarding the pace and impacts of climate change and support the Commission updating its reliability assessment with higher load forecasts, volatility and increased assumptions of fossil fuel plant retirements,” utility spokesperson Paul Doherty said in an email.