5.
Please provide your organization's comments on the Economic Study Requests.
Cal Western is submitting an economic study request for the Pacific Transmission Expansion Project (PTE or PTEP) in the 2024-25 TPP.
Dear CAISO Transmission Planning,
California Western Grid Development LLC (“California Western Grid”) appreciates the opportunity to comment on the CAISO’s 2024-2025 Draft Study Plan (“Study Plan”) and submit this economic study request for the Pacific Transmission Expansion Project (“PTE” or “PTEP”). We also hereby request that CAISO study the PTEP as a solution to the reliability needs described herein and as a transmission solution needed to accommodate deliverability and the State Public Policy needs identified in Senate Bill No. 887 (“SB 887”). Given that the PTEP addresses all these various needs, we request that the CAISO considers these study requests at the appropriate time in the 2024-2025 Transmission Planning Process (“TPP”). We also request that the PTEP be analyzed as a Multi-Value Project (“MVP”) on the basis of its cumulative reliability, economic, deliverability, and public policy benefits, as contemplated and provided for in the Study Plan. We commend the CAISO for clarifying the role of MVP’S in the Study Plan. Analyzing all the benefits of a project is the best approach for “no regrets” planning.
The PTEP is currently being studied in the 2023-2024 TPP as both a reliability and economic project and we also requested to be studied as an MVP project. As described there, PTEP is a controllable 2,000 MW HVDC system utilizing subsea cables, which the CAISO has found will allow existing power available at the Diablo Canyon 500 kV switchyard, new sources of offshore wind (“OSW”), or other new sources of renewable energy to be delivered to and between northern and southern California. CAISO has determined that a similar configuration can reduce Local Capacity Requirements (“LCR”) in the West LA Basin by approximately 1,993 MW, thereby displacing the need to rely on a similar amount of local capacity. An alternative topology with the same LCR benefit consisting of a new substation at Morro Bay looped into the existing Gates to Diablo Canyon 500 kV transmission line was also provided. California Western Grid requests the PTEP be studied in the 2024-2025 Transmission Planning Process (TPP), with the following HVDC converter stations:
- One 2,000 MW, ±525 kV HVDC bipole converter station located at the northern terminus of the project, connecting either at the Diablo Canyon 500 kV AC station or a future Morro Bay 500 kV AC station.
- One 2,000 MW, ±525 kV HVDC bipole converter station located at a site in El Segundo, with underground HVDC cables from the shoreline to the converter, and the following AC connections:
- Two 220 kV AC underground cable circuits to El Nido substation; and
- Two 220 kV AC underground and offshore cable circuits to Redondo substation.
California Western Grid also encourages the CAISO to evaluate different configurations of the PTEP, to the extent CAISO Staff thinks appropriate, including multi-terminal configurations and alternative points of interconnection (POI).
In the 2021-2022 TPP Report, the CAISO stated that:
The potential PTE project benefit of reducing capacity requirements needs to be reassessed in future planning cycles as the assumptions change, particularly if the need to retain the existing gas-fired fleet for system-wide resource reliability purposes is relaxed.
Some of the assumptions related to the study of the PTEP have changed, which warrants the reassessment of the PTEP, and we call you attention to the following five factors:
- Senate Bill No. 887
In 2022, the Legislature unanimously approved, and the Governor signed, SB 887 into law. SB 887 identifies an urgent State Public Policy need for new transmission that can deliver renewable energy into currently transmission constrained load centers. SB 887 states that considering the CAISO’s FERC approved tariff that requires the CAISO to plan and approve transmission needed to meet state, federal, and local public policy needs, the legislature expects CAISO to take notice of the State Public Policy needs identified in SB 887.
- CAISO 20-Year Transmission Outlook
The CAISO’s first-ever 20-Year Outlook was issued on January 31, 2022. In the Outlook, the CAISO states that:
The CAISO expects to conduct additional stakeholder dialogue through 2022 about the next steps as well as the long-term architecture set out in this 20-Year Outlook. Those additional efforts, together with the 20-Year Outlook and evolving resource planning and procurement, will inform the CAISO’s annual transmission planning processes that approve and initiate specific projects.[1]
This 20-Year Outlook anticipated 15,000 MW of gas plant retirements by 2040, including 3 to 5 GW of retirements in the Los Angeles Basin and Big Creek-Ventura area. [2] In the 20-Year Outlook, the CAISO found a need for an HVDC system from Diablo to LA and stated that the PTEP is an example of the line that is needed.[3]
- California Public Utilities Commission February 15, 2024, Decision Adopting 2023 Preferred System Plan and Related Matters, And Addressing Two Petitions for Modification (R.20-05-003).
This Decision by the California Public Utilities Commission (“CPUC”) transmits a Base Case Portfolio for the CAISO to use for transmission planning for the 2024-2025 TPP that will surely drive the need for significant new transmission and includes the following:
- “56.6 GW of new resources by 2035, on top of the dramatic increases already reflected in the pre-existing resource mix. [4]
- The number of new renewable resources grows to 74.7 GW in the Commission’s base portfolio for 2039. A portfolio which, according to the Commission can be used by the CAISO to “inform and guide [transmission] upgrades recommended for approval for the 2035 portfolio.” [5]
- A twenty-five million metric ton (“MMT”) target, high transportation electric loads, and 4.5 GW of OSW.
- Even without the dramatic Increases in new generation reflected in the Base Case Portfolio, the CAISO is experiencing deliverability issues associated with interconnecting new generation.
The PTEP provides several deliverability benefits to the Bulk Electric System. These include the ability to deliver power directly from Central California to West LA, offset LCR requirements within the LA Basin Local Capacity Area (“LCA”) and provide much needed transmission capacity between northern and southern California. The PTEP previously demonstrated, as was confirmed by the CAISO, that it could reduce local capacity requirements within the LA Basin, potentially allowing for the replacement of up to 1,993 MW of thermal gas fired generation capacity. The PTEP will deliver 2,000 MW into the LA Basin, providing a 1:1 benefit in reducing the need for existing gas-fired generation in the LA Basin. These power injections also provide mitigation for some of the Southern California Edison (“SCE”) metro area contingency overloads identified in the CAISO 2022-2023 Transmission Planning Process (“TPP”).
In addition, the PTEP provides significant benefits in mitigating constraints on transfer capacity flows on Path 26 which continues to be identified as a congested path. In the 2022-2023 TPP, the PTEP was identified as providing high effectiveness in relieving flows under contingency conditions.
- The CAISO has found that the PTEP provides valuable transfer capacity that can reduce reliance on the LA Area gas plants and the Aliso Canyon Gas Storage Facility
At the November 17, 2022, stakeholder presentation, the CAISO provided the results of a sensitivity study showing that the PTEP could reduce dependence on the Aliso Canyon Gas Storage Facility (“Aliso Canyon”) and allow, but not require, it to retire. This is an important option for the state and a meaningful benefit considering the State’s desire to close that facility at some point in the near term. PTEP would also reduce reliance on Aliso Canyon prior to its retirement.
In light of the preceding factors affecting the assumptions made in previous studies of the PTEP, we request the CAISO to study the PTEP as a transmission solution that will provide multiple benefits to CAISO ratepayers, including mitigation of Path 26 congestion, reduced renewable curtailment, substantial Local Capacity Benefits and reduced reliance on gas plants by 2035, which SB 887 establishes as a public policy need.
In California Western Grid’s October 14, 2022, filing for the 2022-2023 TPP[6], we submitted an independent analysis performed by E3 of the benefits the PTEP will provide, even if the gas plants remain in service through the study period (“E3 Analysis”). The E3 Analysis is also discussed in California Western Grid’s October 2023 request to be studied in the pending 2023-2024 TPP. California Western Grid hereby incorporates herein by reference these prior study requests and will not repeat the many benefits analyzed therein. The E3 analysis concludes that, without retirement of any gas generation and without quantifying many of the known benefits of the PTEP (wildfire risk reduction, reduced reliance on Aliso Canyon, air quality improvement especially among underserved communities), economic benefits of the PTEP would offset more than fifty percent (50%) of the PTEP’s cost. And the benefits not quantified include environmental air quality benefits that lie at the core of the State’s energy goals, as well as wildfire mitigation benefits that SB 887 requires to be considered in planning new transmission. Thus, we urge the CAISO to evaluate the benefits of the PTEP in terms of the cumulative “multi-valued” benefits the PTEP provides, including the benefit of accommodating the need for transmission to meet State Public Policy needs identified in SB 887. A silo approach to analyzing benefits is sure to ignore the true value of a project like the PTEP.[7] In terms of the quantifying the benefits of the PTEP, we request that the CAISO utilize the E3 methodology, which anticipates storage (not gas-fired generation) becoming the marginal Resource Adequacy (“RA”) resources in the 2030’s and beyond. The E3 methodology is described in detail in the October 14th filing. To the extent necessary or appropriate we will provide an update to the E3 Analysis prior to the CAISO’s economic study.
Importantly, we disagree with the CAISO’s historic approach to continue using conservative valuations for LCR benefits as mentioned above. We believe the E3 methodology is a superior approach to calculating LCR benefits and should be used by the CAISO to quantify LCR reduction benefits.
But even if the CAISO continues to use gas plants as the marginal RA resource in the 2030’s and beyond, the CAISO valuation understates the actual cost of LCR when procured from existing gas fired resources, especially in West LA. Based on the publicly available FERC EQR data for 2021, the weighted average price of local capacity contracts in the Western LA Basin ranges between $4.86/kW-month and $7.45/kW-month. This is based on an analysis of the publicly available FERC EQR data for existing RA contracts totaling 2,434 MW of existing gas plants in the LA Basin. This is in sharp contrast to the approximately $2.00 / kw/mo. the CAISO has historically used as the cost of LCR procurement in the LA Basin.
More recent events demonstrate how significantly the CAISO understates the cost of continued operation of gas plants in its LCR analysis, especially in transmission constrained local areas. The California Department of Water Resources recently contracted for resources needed to create the AB 205 California Strategic Reserve. It is an excellent example of the extraordinary prices that a fossil generator located in transmission constrained local area could demand for Local RA procured through the CPUC IRP proceeding or through the CAISO emergency procurement provisions. The capacity payments alone for the 2,859.3 MW of LA Basin strategic reserve from the Long Beach, Huntington Beach and Oxnard gas power plants ranged from $8.82/kw/mo. to $10.95 /kw/mo.[8]
California Western Grid submits that the CAISO TPP will not achieve its objective of providing helpful information to State policy makers and regulatory agencies by continuing to use “conservatively” low or outdated values for local capacity.
We agree with and support the CAISO’s previous comment to the CPUC that transmission solutions can have long lead times and, therefore “planning for transmission-dependent projects should start as soon as possible.”[9] Indeed, if the State is to reach its 2030, 2035, and 2045 greenhouse gas (“GHG”) SB 100 requirements in a reliable and least-cost manner, the CAISO must begin planning now for transmission solutions that reduce LCRs that currently cause reliance on local fossil fuel-fired resources. To do so, the CAISO will need to change its highly conservative assumptions and use realistic capacity values in its economic analysis and begin to incorporate the added cost of operating and maintaining the generation plants that are providing LCR capacity.
We appreciate the CAISO’s consideration of these comments, and we urge the CAISO to re-study the PTEP in the 2024-25 TPP consistent with the comments herein. We are available to discuss the PTEP’s many benefits with CAISO transmission planners at your convenience.
Thank you for your consideration.
Sincerely,
Marty Walicki
Martin Walicki
on behalf of California Western Grid Development, LLC
[1] 20-Year Outlook, page 57.
[2] 20-Year Outlook, Table 3.1-4: Assumed gas-fired generation retired by local capacity area.
[3] 20-Year Outlook, pages 48-49.
[4] CPUC Decision 24-02-047 dated February 15, 2024, page 68.
[5] CPUC Decision 24-02-047 dated February 15, 2024, page 70.
[6] (“October 14th Filing.)” See, pp 30-32 of Attachment A.
[7] See also, October 14th Filing at 32.
[8] See Cal Matters article by Rachel Becker dated August 15, 2023, which states: “……. three power plants in Long Beach, Huntington Beach and Oxnard will be kept in reserve for three more years to feed energy into the state’s grid during power emergencies” ……” The state agreed to pay the plants’ operating companies about $1.2 billion from 2024 through the end of 2026 to stand by during energy events, such as heatwaves.” https://calmatters.org/environment/2023/08/southern-california-natural-gas-plants-remain-open/
[9] See CAISO comments filed on March 12, 2020, with respect to the Administrative Law Judge’s Proposed Decision on the “2019-2020 Electric Resource Portfolios to Inform Integrated Resource Plans and Transmission Planning”