Dive Brief:

• The California Public Utilities Commission (CPUC) on Thursday unanimously passed a decision aimed at preventing rolling blackouts from affecting the grid this summer, despite concerns from environmental and other groups that it could set the state back on its clean energy goals.

• The decision directs the state's investor-owned utilities to contract additional capacity for the summer 2021, including incremental capacity from existing power plants — a move that has worried conservation groups who say it will result in contracts for more natural gas capacity.

• While regulators acknowledged these concerns, "I feel strongly that we need to keep options on the table for this summer … and I'm convinced that because of the very short timeframe between now and [then], any additional capacity the utilities may be able to identify will be minimal," CPUC President Marybel Batjer said.

Dive Insight:

The decision is part of California regulators' broader efforts to ensure the rolling blackouts that affected the grid last August don't occur again. A root cause analysis issued by the state's energy agencies following the blackouts identified the need for expedited procurement processes to ensure adequate resources are online by the summer of 2021, and in November the CPUC launched a rulemaking to address the issue. 

The decision approved by the commission this week identified four resource types that the utilities could consider: energy storage capacity, firm forward imported energy, contracting generation at risk of retirement, and additional capacity from existing power plants, via revised power purchase agreements or efficiency upgrades. 

But the last category has drawn criticism from multiple groups, including the Sierra Club, the California Environmental Justice Alliance and the Union of Concerned Scientists, who worry that the decision will result in contracts for gas capacity and run counter to the state's climate goals and air quality requirements. The groups also pointed to the environmental and health risks associated with gas plants, and in particular their impact on disadvantaged communities. 

Regulators, however, said at the meeting that the decision is critical to keeping the lights on. CPUC Commissioner Clifford Rechtschaffen noted that the approved decision expresses a preference for energy storage resources as opposed to natural gas facilities, as well as short-term contracts in the case of natural gas as opposed to longer-term ones.

"We really don't envision long-term gas contracts resulting from this authorization, except perhaps in very narrow, unexpected circumstances," Rechtschaffen said.

The impact of climate change on weather patterns and energy use requires the state to adjust and revisit in real time its assumptions around balancing supply and demand, and ensure that it has enough demand-side resources and supply-side resources to keep the lights on, Batjer said. The CPUC intends to issue another decision in March addressing demand-side resources as well.

"[T]he fact that this came first doesn't reflect a preference for supply-side resources for solving this problem. It actually is quite the opposite — demand side resources are my priority for getting us most of the way there for ensuring reliability for next summer," Batjer said. 

The role of natural gas in California's energy mix has been a contentious issue in the state. Last year, the CPUC opened a rulemaking that will, among other things, implement a long-term planning strategy to manage the state's transition away from natural gas-fueled technologies to meet its decarbonization goals. 

Jonathan Peress, senior director of regulatory affairs at Southern California Gas, the nation's largest gas utility, said that as electric demand increases due to the electrification of transportation and thermal heating load, and the amount of variable renewable capacity increases, there might be a decrease in the use of gas on an annual level, but an increase in the use of gas as a resiliency and reliability resource on a daily and multi-day basis. 

"There's not a credible model that suggests that the system can run reliably without gas-fired generation, even as you decarbonize," meaning that the industry will have to decarbonize those molecules or capture the carbon in order to meet the state's climate goals, he said.  

But Katherine Ramsey, staff attorney with Sierra Club, said that there are plenty of resources and tools available to the state to meet increases in electric demand, including demand-side resources to make demand more flexible and shift it to times when renewables are generating, as well as supply-side options like solar-plus-storage, energy storage, wind and geothermal resources. 

"There are plenty of alternatives to gas," she said. 

Sierra Club had recommended that the commission incorporate limitations in the procurement order to make sure it only results in a small amount of procurement for the short term — for instance, placing restrictions on the megawatts of capacity authorized, or limiting contracts to one to three years, Ramsey said. But these suggestions were not included in the final decision. 

"The longer and bigger contracts that you see for gas plants makes it harder to retire them and switch to something cleaner," Ramsey said, adding, "it definitely puts our air quality goals at risk for all the communities that live near gas plants, and so we think there are real equity concerns."