The California ISO on Dec. 17 said that its Board of Governors has voted to designate a 250-MW power plant as a reliability must-run (RMR) resource to help ensure California has the capacity and energy needed to meet next summer’s electricity demand.
The board’s unanimous decision retains 250 MW of needed generation by ensuring that Midway Sunset Cogeneration Company’s (MSCC) facility remains in service, and enables one previously mothballed unit to return to service, the ISO said.
Generators identified as RMR resources are required to remain in service to provide energy and resource adequacy capacity even though their available capacity is not currently under contract, the ISO said, noting that the board’s action requires the ISO to enter into an agreement with MSCC. That agreement will require FERC approval, the ISO said.
The ISO noted that its supply analysis concluded that the capacity provided by MSCC’s units may be necessary to serve load and meet NERC and Western Electricity Coordinating Council (WECC) operational standards.
As noted in a Dec. 9 memorandum to the board from Neil Millar, vice president of Infrastructure and Operations Planning, MSCC in late September submitted notice of retirement for two of its generating units, effective Dec. 31, with the third unit having already been mothballed earlier this year.
Millar noted that the ISO’s most recent analysis of supply for 2021 demonstrates that the Midway Sunset Cogen is required for reliable operation of the transmission system in 2021 in compliance with mandatory standards BAL-002-WECC-2a, which requires the ISO to carry about 6% of expected load as contingency reserves. However, Millar said, the ISO expects compliance with BAL-001-2 and BAL-003-1.1 would also likely be compromised absent their RMR designation.
Millar’s filing noted that with the proliferation of solar resources — behind the meter and grid-connected — the most critical hours the ISO typically faces now are after the peak load period when load is still relatively high, but intermittent resource generation is below its capacity value and output is rapidly declining.
The Preliminary Root Cause Analysis (PRCA) pointed to the net demand peak period — the peak of load net of solar and wind generation resources — as an especially challenging period for grid operations during the August heat storm. That aligns with the 2020 Summer Loads and Resources Assessment prepared in the spring that identified the post-solar window as being the highest risk period, the filing said.
The pending loss of the Midway Sunset Cogen facility, which is capable of providing service over the critical post-solar window, will exacerbate reliability shortfalls in meeting the requirements of BAL-002-WECC-2a and, it therefore must remain online to help the ISO close the gap to meeting the mandatory reliability standards, the filing said. The capacity that the units provide will assist in meeting load levels in the post-solar window, and the dispatchable units A and B will provide further flexibility to meet the ramping requirements necessary as the solar output drops in the late afternoon, according to the filing.
In its statement, the ISO noted that the board also took such actions as approving the Energy Storage and Distributed Energy Resources (ESDER 4) default energy bid proposal to apply local market power mitigation measures and establish a default energy bid policy for storage resources.
As noted in a Dec. 9 memorandum to the board from Anna McKenna, interim head of Market Policy and Performance, the ISO’s ESDER initiative focuses on lowering barriers and enhancing the participation of storage and distributed energy resources in the ISO market.
McKenna noted that management proposes that the board approve the tariff revisions necessary to implement a proposal to apply local market power mitigation measures to storage resources and the formulation of a default energy bid for storage resources. Management also proposes that the board authorize management to make all necessary filings to FERC to implement the proposed deliverability methodology revisions, McKenna said.
Default energy bids are an important market feature that ensure market participants receive sufficient market compensation to cover their marginal costs, McKenna said, noting that if that bid is below a resource’s true marginal costs, then it can create an unsustainable situation for market participants where compensation could be less than actual marginal costs.
Noting that the construction of the default energy bid for storage resources includes a process not used for default energy bids available to other resources, McKenna said that the proposal provides an estimate of that value at the lowest prices of the day, with management contending that rational behavior from a storage resource would dictate that those periods are the periods when energy is procured. To compute that value in the day-ahead market, the market software will use an earlier run of the day-ahead market to obtain the energy charging costs. McKenna added real-time default energy bids will also be calculated using energy prices from the day-ahead market.
“Historically, the convergence between these two markets has been good, and therefore Management believes these are reasonable estimates for the cost that storage resources will incur to procure energy,” McKenna said.
Among other things, McKenna noted that there are about 550 MW of grid-connected storage resources installed on the ISO system, and that management anticipates that about 1,500 MW of storage resources will be installed and operational on the ISO grid by the end of 2021.