Peninsula Clean Energy director weighs in on California's new RA Framework
As the California Public Utilities Commission (CPUC) holds workshops ironing out details for the new Resource Adequacy (RA) framework, Peninsula Clean Energy (PCE) lends its support to the program.
Jeremy Waen, director of regulatory policy at PCE, told NPM that the CPUC’s decision to shift the state’s RA program to a 24-hour slice construct is a much-needed change.
“The present RA program only considers the capacity needs of a few hours in a few days of the year and assumes procuring those needs will address all capacity needs throughout the year,” Waen stated.
But as California moves to increase its electricity supply to more renewable energy, and as supply resources of gas and nuclear retire or become less effective – such as hydro, Waen said “a more sophisticated means of ensuring adequate electricity generation capacity” is needed. That generation capacity also must be available all hours every day of the year
The RA framework is for load serving entities (LSEs) and hold potential impacts for solar and wind value in the state. To address shortfalls in capacity at net peak, the CPUC solicited framework proposals in 2020. This led first to the tentative adoption of a slice-of-day proposal from Pacific Gas and Electric (PG&E). However, workshops to develop the proposal later led to two alternate proposals from Southern California Edison (SCE), which had the now adopted 24-hour-slice proposal, and also Gridwell Consulting’s two-slice proposal.
Waen told NPM that it is standard practice at the CPUC for stakeholders that are formally recognized as “parties” to be permitted to make policy proposals and that there were numerous parties with diverse interests engaged in the RA proceeding. This included utilities, Community Choice Aggregators (CCAs), ratepayer advocates, and consultancies.
“Though PCE did not advance its own standalone proposal, we negotiated heavily with other parties to improve the proposal advanced by others,” he said.
PCE was also part of the CalCCA team that co-sponsored an earlier version of the 24-hour slice proposal that the CPUC did not initially advance for further consideration. Additionally, the SCE proposal modified many elements from the earlier version to craft the framework that has since been adopted.
The new framework is expected to influence how much capacity from wind and solar resources qualify to meet RA obligations, translating to how much RA value can be sold to LSEs. This means contractual obligations to provide RA to an offtaker may see impacts from the new framework if there is an existing contract.
The RA framework may impact how wind and solar resources are valued by moving from a monthly measurement to an hourly one, though wind and solar existing contracts are expected to be valued under an “exceedance methodology,” which means existing contracts may require small or no modifications.
Of course, the impact of the new framework is still unknown as implementation workshops are held between now and October. The workshops are to establish these details prior to the CPUC’s implementation decision is anticipated to come out early 2023. It is anticipated that the CPUC will have a test run of the new framework in 2024 and its first compliance year in 2025.
When asked what the framework means for PCE and its projects, Waen said that because PCE aims to provide its customers with renewable energy on a 24/7-time coincident basis by 2025, it views the RA program as “absolutely necessary change.” It also worked collaboratively with SCE to refine and improve the 24-hour-slice concept.
“Without it, our agency’s procurement objectives and the state’s reliability mandates could become unnecessarily at odds with each other,” he said. “This would likely mean higher costs of energy services for ratepayers across the state.”
Waen added that PCE believes the new RA structure will more fairly value the capacity provided by wind and solar resources, whether they are or are not combined directly with energy storage.
“This was part of the reason we supported this concept,” he said.
When the CPUC adopted the new framework, it did not allow hourly trading but is expected to revisit the topic in the future. Waen said that on this specifically, PCE was one of the co-sponsors of the hourly obligation trading alongside San Jose Clean Energy and the California Energy Storage Alliance. PCE also supported the hourly resource trading proposal.
“PCE believes the lack of action by the CPUC to adopt either an hourly resource or obligation trading mechanism concurrently with the 24-hour-slice program was a significant shortfall in the decision,” he said. “Without some way to allow LSEs to optimize their RA procurement across individual hours, there will be excess capacity procured.”
Waen explained that this procurement will then result in unnecessarily higher costs for ratepayers and that PCE is urging the CPUC to change this piece of its decision “as soon as possible to avoid burdening ratepayers with these costs.”
*This story was originally published exclusively for NPM subscribers last month.
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