Myth of the Month: The Adequacy of “Resource Adequacy”

May 29, 2019

Myth of the Month: The Adequacy of “Resource Adequacy”

Oakland skyline. Photo by Daniel Parks, Flickr Creative Commons.

To ensure reliable operation of the grid, EBCE and other energy suppliers buy two main products: energy and resource adequacy, or RA. The energy is the kilowatt-hours that run your Instant Pot, while resource adequacy is the ability to provide reliable service at all times.

There is a myth that community choice aggregators like EBCE are falling short on RA.

Bill Her, Director of Power Resources for EBCE, says this is far from the truth.

“Some think we aren’t focused on reliability since we have ambitious renewable energy goals,” he says.

But EBCE and all electricity providers are under strict rules to ensure reliability under the state-mandated RA program.  

To understand how EBCE and other energy suppliers provide energy and RA, let’s take a look at the nuts and bolts of electricity commerce.

 

WHAT IS RA, AND WHY SHOULD YOU CARE?

Resource adequacy, or RA, ensures that there will be enough resources on the grid to serve customers at any given time. Each energy supplier is responsible for demonstrating that it has enough RA to serve its customers, and the ability to follow changes in demand.

Energy suppliers often buy RA separately from energy, so while a growing amount of energy comes from wind and solar power, most RA in California still comes from natural gas plants because of their ability to be dispatched and follow demand.

Here’s how the RA process works.  First, every energy supplier (including EBCE) submits a forecast for future demand. That is checked by the CPUC, and suppliers are required to buy enough RA to cover the forecast plus a 15 percent margin. Suppliers have to buy RA for the power system as a whole, RA in designated local areas across their distribution utility’s service area, and flexible RA that follows load up and down. RA plans are typically submitted for verification by October of the year before operations and then updated monthly.

The CPUC and CAISO tally up all the RA purchases to make sure there is enough RA to keep the lights on, and that energy suppliers aren’t double-counting the same supply.

EBCE develops demand forecasts up to a year in advance and shops for RA through competitive solicitations and by approaching potential suppliers directly. EBCE is required to buy over 1000 megawatts of RA for its peak months.

 

IMPROVEMENTS NEEDED

The RA process works, and the lights stay on, but Bill Her says the process could be improved.  Since there is no central market for RA like there is for electricity though the California Independent System Operator (ISO), all RA deals are bilateral, directly between the buyer and the seller. It can be hard for buyers and sellers to match up.

“It’s not a very liquid product and the different types of RA make it more complex,” Her says.

Generator owners prefer to sell their RA uniformly across the months, rather than in bits and pieces. Because buyers need different amounts of RA each month, they often end up with too much in some months, resulting in higher procurement costs.

Some suppliers hold back from offering all their RA to replace the amounts contracted in case there are outages. This means sometimes there may be a shortage of RA in the market but the power grid can still meet the reliability requirements.

A related issue is the long-term planning process, known as the Integrated Resource Plan. The CPUC recently tallied up the plans of all power sellers in the state and found that the collective plan “does not represent a diverse and balanced portfolio of resources needed to ensure a reliable electricity supply and optimal integration of renewable energy in a cost-effective manner.”

Her chalks it up to the transition to renewable energy, and the move away from natural gas generators. “People are planning to buy renewables, not gas,” he says. “When you model that, it suggests less traditional reliability. So you need new forms of RA.”

EBCE is trying out alternatives in Oakland’s Jack London Square, where an old power plant that burns jet fuel is being retired in favor of clean energy storage which can include local solar, battery storage, and flexible demand. (See “Relief is on the Way for West Oakland Air Quality,” November 2018). The local RA benefits are a critical value in that project.

The PUC is opening a new “procurement track” that will look at creating a diverse mix of renewables to create “the 2030 optimal portfolio,” ensuring there are load following and integration options, what to do with existing natural gas resources, and the potential for long duration energy storage.

Her expects more reforms to help the transition to 100 percent clean energy.  The PUC is already switching to require local RA purchases of three years at a time, rather than the current one year.

“That longer lead time will give greater visibility and greater ability to make adjustments,” he says.  “You can’t just create RA overnight; you need a lead time to plan for it.”

For more on RA, see Resource Adequacy – What Is It And Why Should You Care? from Mike Florio at Gridworks.