California Passes Legislation to Prevent Blackouts, Creates Grid ‘Insurance Policy’

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Diving brief:

  • California lawmakers on Wednesday passed a bill establishing a new certification process for solar, wind and other non-fossil fuel plants over 50 MW, as the state scrambles to expand power projects renewable energy it needs to ensure grid reliability..
  • The bill also creates an electricity reliability strategic reserve fund, authorizing the funding of resources that can help keep the lights on. California Governor Gavin Newsom, D, allocated $5.2 billion in his revised May budget proposal to create such a reserve, a resource pool of up to 5,000 MW.
  • “We see this as the governor looking for an ‘insurance policy’ to tide over the state in case we run out of market-based production available to keep the lights on,” said Jan Smutny-Jones, CEO of Independent Energy. Association of producers.

Overview of the dive:

Although California has added more than 4 GW of resources in the past year, state officials are concerned that ongoing drought, heat waves and other issues could further compromise the reliability of its energy supply. electricity. The California Independent System Operator estimates that the state faces a capacity shortfall of 1,700 MW, which could grow to 5,000 MW if California is hit by multiple extreme events at the same time.

The Strategic Electricity Reliability Reserve presented by the governor in his budget proposal would help the state respond quickly to electricity demand if needed. In the budget proposal, Newsom’s administration said the reserve could include existing generation capacity that was to be retired, new storage projects, as well as backup diesel and natural gas generation. State regulators have recognized that much of the pool could come from natural gas generation.

The bill passed by lawmakers on Wednesday would create this strategic reliability reserve fund and authorize funding to add resources that can help ensure power system reliability, and directs the California Department of Water Resources to implement these projects and contracts.

One of the concerns is that when the department purchases these resources, it does not affect the competitive market in California, which has so far been quite successful in attracting private capital to build power plants – both conventional power plants and the renewable fleet, Smutny-Jones said.

“If the markets are distorted, you are going to drive out these private investments. I don’t think that’s their intention,” he added.

The new certification process outlined in the bill would apply to solar and wind installations with a generating capacity greater than 50 MW and energy storage systems capable of storing more than 200 MWh of electricity, among other projects . The agency has a lot of experience siting power plants, said Seth Hilton, a partner at Stoel Rives, which represents energy developers and generation owners, including owners of fossil fuel generation. .

“I think it potentially provides a centralized process that could be more accelerated to enable improvements to the process of locating clean energy projects,” he said of the new framework.

The legislation, however, has been criticized by several stakeholders, including some California lawmakers. State Assemblyman Al Muratsuchi, D, told a hearing on Wednesday that the trailer bill was “a rushed, unchecked, fossil fuel-rich response.”

“[T]Having more taxpayers’ money to fund and continue to operate fossil fuel-powered plants is not the right way to go,” he said.

Trade association Advanced Energy Economy, meanwhile, said in a statement that the budget deal “opens [the] door to extending the life of fossil fuel generation and missing the mark on creating a more reliable, clean and affordable grid system.

“Better planning to meet short-, medium-, and long-term needs will enable California to succeed,” AEE policy officer Emilie Olson said in a statement.

Other lawmakers, however, have said the bill, while not great, is California’s best alternative for ensuring the reliability of its power system.

“Yeah, it’s an ugly bill, but it’s the best hope we have to keep the lights on,” Assemblyman Bill Quirk, D, said during the hearing.

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