Lessons for the Clean Energy Transition from CAISO’s Root Cause Analysis Report of the Summer 2020 Heat Storm

Nathan Lev

January 15, 2021

On August 14 and 15, 2020, California’s Independent System Operator (CAISO) directed utilities to initiate rotating outages (i.e., load-shedding) due to constrained grid conditions, which resulted in hundreds of thousands of Californians experiencing rolling blackouts. Subsequently, CAISO, California Public Utilities Commission (CPUC), and California Energy Commission (CEC) jointly released the Preliminary Root Cause Analysis: Mid-August 2020 Heat Storm on October 6, 2020 at the request of Governor Newsom. The final report, which was published on January 13, 2021, incorporated additional data into its analysis but supported the same findings and conclusion [1] Mainly, the report outlines three contributing factors and recommendations for California. The lessons reported are applicable to all jurisdictions undergoing clean energy transitions in the face of shifting climatic conditions.

Climate change-induced extreme weather events result in electricity demand levels that exceed previously observed patterns used for planning.

The heat storm experienced throughout California and the Western US brought record-breaking temperatures, including an event that is forecast to occur only once every 35 years. This was undoubtedly the main driver of increased electricity demand due to air conditioning and other space cooling uses, exacerbated by COVID-19 work-from-home trends. For example, while the CAISO uses a peak demand-plus 15% reserve planning margin as a resource adequacy target, on August 14th, the operational need arising out of the extreme weather was 1.3-2.5% higher than the 15% reserve planning margin, driven by higher load. Further, since California often relies on imports during extreme events and the heat wave was widespread throughout the western region, neighbouring jurisdictions had little capacity to export as they needed the capacity in to serve their own market.

In transitioning to a cleaner resource mix with increased renewable generation, planning targets must focus on resources that can be relied upon to meet demand in any situation.

As mentioned above, CAISO uses a peak demand-plus 15% planning reserve margin to meet resource adequacy requirements. However, the report notes that the rotating outages did not occur during peak demand hours. Rather, they occurred later in the day. This challenges the planning paradigm that if there is enough capacity to support peak demand then there is sufficient capacity to meet demand for all other hours. As jurisdictions continue to transition towards cleaner energy resources, the share of wind and solar resources that cannot operate on a 24/7 basis will continue to increase resulting in shifting operational needs. Indeed, CAISO has identified net peak demand as a critical period throughout the day that is challenging to meet. Net peak demand is defined as peak load net of solar and wind generation, which generally occurs later in the day then peak demand. For example, on August 14th, net peak demand occurred at 6:51pm and was 4,565 MW lower than peak demand, which occurred at 4:56pm. However, over the same hours on August 14th, wind and solar generation had decreased by 5,431 MW. It is evident that as resource mixes continue to change, critical periods will shift throughout hours, seasons, and conditions.

Market and scheduling practices must not distort supply and system conditions.

CAISO recognized that certain market practices led to an inability to obtain additional energy that could have alleviated strained conditions. Mainly, scheduling coordinators under- scheduled on average 3,500 MW of demand in the Day-Ahead Market, which signalled to internal resources that they could monetize their additional capacity through exports. Additionally, CAISO identified similar results arising out of convergence bidding and the configuration of the residual unit commitment market process.

Lessons for transitioning jurisdictions.

The report provides recommendations for the near-, mid-, and long-term periods. Among them are included adjustment to market practices to address under-scheduling, tracking and ensuring that resources under construction meet their planned operational dates, and expediting processes to support demand-side resources with a focus on flexibility and demand response. Other recommendations can be taken as lessons for other jurisdictions:

• Resource planning and procurement: System planners and regulators should consider whether their resource adequacy requirements adequately consider for extreme weather conditions and accurately reflect their supply mix’s ability to meet system demand in all conditions.
• Improving situational awareness and planning for contingencies: Similarly, system operators should develop sufficient protocols with their neighbours and all available internal resources to address contingencies and extreme events in real time.
• Resource planning and development: As jurisdictions continue to transition to cleaner energy supply mixes, they should consider how the resources operational characteristics and constraints contribute to critical periods and apply this understanding to capacity qualification and other metrics used for planning and market purposes. It is evident that the need for flexible and demand-side resources is emerging.

[1] Final Root Cause Analysis: Mid-August 2020 Heat Storm, prepared by: California Independent System Operator, California Public Utilities Commission, and California Energy Commission, published January 13, 2021: http://www.caiso.com/Documents/Final-Root-Cause-Analysis-Mid-August-2020-Extreme-Heat-Wave.pdf.

[2] Final Root Cause Analysis, page 45.