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Instead of increasing demand response to help avoid blackouts during intense heat, a California Public Utilities Commission staff proposal would continue restricting its use on grounds some resources failed to show up during the August outages. At the same time, the fleet of gas plants are getting increased financial support in order to play a larger role in meeting upcoming summer demand. That is despite several units going down mid-August, resulting in the loss of an estimated 1,700 MW that was paid in advance to provide capacity.

Demand response would remain capped at 8.3% or possibly be lowered under a staff proposal in the CPUC’s Resource Adequacy’s Track 4 proceeding released Jan. 29. The 8.3% cap is essentially met by private utility programs, largely cutting out third party demand response providers, Jim Caldwell, Center for Energy Efficiency and Renewable Technologies Center senior technical advisor, said.

Despite widespread criticism of the state for sidelining demand response, CPUC staff say commissioners should consider limiting demand response even more because of no shows. However, demand response plays a far larger role in other markets, including in PJM and in Texas.

CPUC staff not only propose that the commissioners consider whether the 8.3% cap is “appropriate” but “whether a lower one should be considered for DR serving as a reliability resource.” Staff also suggest capping payments to demand response at much lower prices than other resources. They would be paid $1,000 MW, although the grid operator payments will rise next month to $2,000 MW.

A thousand cuts

“It is death by a thousand cuts,” Caldwell said. The CPUC resource adequacy proceeding is only one of half a dozen ongoing proceedings with multiple tracks dealing with demand response. The separate proceedings exacerbate the already labyrinthian demand response market.

As it is, demand response is a fraction of its potential in California, according to Lawrence Berkeley National Laboratory Study.

During last August’s heat wave, some DR providers said they offered to help provide far more load reduction into the market but were rebuffed. Other demand response companies said the CPUC’s payments were so low that there would be little or no profit.

The backwards momentum on demand response is in spite of state energy agencies professed commitment to improving grid stability this summer with a variety of resources.

Instead of discouraging bad actors, the CPUC is creating an untenable market for good actors, Caldwell said.

Caldwell and others contrast the treatment of demand response with what they say is preferential treatment given to gas fired resources. This is happening at the same time the state is striving to reach a carbon neutral economy.

In mid-August, some demand response providers were not the only nonperformers. So too were some power plants.

Non performance by coastal plants

Output from the aging coastal power plants fell significantly during the mid-August blackouts, according to Bill Powers, with Powers Engineering. He found that on Aug. 14, three of nine once-through cooled units were completely offline and two partially down, totaling more than 1,700 MW. Out were the 336 MW Alamitos Unit 4, 179 MW Redondo Beach Unit 5, and 741 MW Ormond Beach Unit 1. In addition, Powers said that two investor-owned utility coastal plants suffered partial outages: with 180 MW curtailed at Pacific Gas & Electric’s Gateway plant, and another 280 MW at San Diego’s Desert Star facility.

Jan Smutny-Jones, Independent Energy Producers chief executive officer, was skeptical of Powers’ numbers, saying he’s seen no independent study to verify them.

“Attacking gas generation seems to be wrong way to go about doing business,” Smutny-Jones added.

In Jan. 11 testimony the California Independent System Operator provided to the CPUC in its proceeding to increase resources in time for this summer, the gas plant outage rate was said to be 10% at the highest. The rate of unexpected plant outages in August was more than 15%, rising to more than 20% last October, according to a Jan. 5 CAISO presentation.

Despite that, gas plants were given contracts this year.

Inverting the loading order

The CPUC is “inverting the loading order,” Power said, also pointing to the commission’s fast track emergency proceeding to get new resources online by this summer. The state loading order gives top procurement billing to demand response, energy efficiency and renewables.

Demand response entails various resources that reduce load on the system or supply power. It ranges from behind-the-meter solar and/or battery systems, curtailment of load at large businesses—from data centers to food processors—and households during emergencies. It also can include microgrids and electric vehicles feeding a hungry grid.

“California has failed miserably” at demand response—specifically in the areas of incentives, bringing it to market and how it’s valued, Gregg Dixon, chief executive officer of DR provider Voltus, complained.

Because of the dimming demand response market, Grid Policy CEO Jon Wellinghoff urged that the wholesale market replace California’s “clogged up” regulatory utility demand response programs. “There needs to be equality between supply and demand resources,” the former Federal Energy Regulatory Commission chair said.

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CPUC is Heading Backwards on Demand Response Forward on Gas Plants

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