1.
Please provide your organization’s comments on the 2025 and 2029 Local Capacity Requirements Draft Study Results.
Form Energy appreciates the Local Capacity Requirement (LCR) Studies and does not have comments on the concrete results at this time. However, we would like to raise ideas for CAISO to consider before the development of future LCR studies.
Multi-day Periods of Grid Stress in LCR Areas Should Be Considered
Currently, the CAISO conducts studies of the ability to serve a single-day 1-in-10 managed peak load, with tests for a variety of contingencies. Resource contributions are measured in net qualifying capacity (NQC). While the studied contingencies do reflect periods of grid stress, they still focus on single-day needs or emergencies. Additionally, with regard to energy storage, the studies assume that there must be sufficient local resources for energy storage to fully recharge from one day to the next.
Increasingly, California has faced multi-day reliability events. Extended heat waves have created multiple back-to-back days of high load, and 2022 saw one of the longest and hottest heat waves in history, a 10-day event that set the record for the highest load experienced on the CAISO system. These extreme events that used to be rare are becoming more common; for example, the August and September 2020 heat waves were 1-in-30 and 1-in-70 events, respectively.[1] Periods of grid stress are also changing: both the California Energy Commission (CEC) and California Public Utilities Commission (CPUC) have identified that the periods that cause the most grid stress in the long run are likely to shift to the winter, during prolonged winter storms that limit solar output. In the next LCR study, CAISO should consider these types of multi-day events and how they could impact local reliability needs. It is essential to begin assessing the ability of local resources to meet net load during sequential day periods of grid stress, rather than solely from one day’s net peak to another.
In recent LCR studies (e.g. the 2024 and 2028 LCR Studies), CAISO has generated information about each region’s estimated maximum energy storage capacity based on an assessment of a region’s minimum charging capability within a day under the most critical contingency. This assessment has assumed that all energy storage resources must fully recharge from one day to the next in order to support the next day’s local reliability requirements. This approach reflects CAISO’s focus on single-day reliability risks and also overlooks the capabilities of newly commercial energy storage resources, such as Form Energy’s 100-hour multi-day energy storage system, which will be operational in the CAISO market as soon as 2025.
One of the key advantages of multi-day energy storage is that it can discharge continuously at rated capacity over sequential days without having to recharge. This capability provides grid operators with a new means to shift excess energy over longer periods of time and meet local reliability needs across sequential days despite limited local generation. In future LCR studies and assessments of energy storage needs, we encourage CAISO to model scenarios that include multi-day energy storage and reflect that this resource class is not bound by single-day charging constraints in the same way that short-duration storage resources are.
Weather-correlated load profiles and renewable generation profiles should be used in LCR Studies.
CAISO should also further consider the correlation between weather, load, and generator output over multi-day periods. There has been significant discussion in California about the performance of the natural gas fleet during heat waves, and CAISO already considers “temperature-adjusted ratings” or ambient derates in the LCR studies.
However, it is not apparent from the study whether CAISO considers multi-day renewable generation shortfall events that are also expected. It is essential that California’s energy agencies consistently use load and generation profiles that are correlated to the same weather year and that reflect diverse weather conditions (at least 1-in-10 weather years).
System load and renewable generation can often be anticorrelated, meaning that system load is high in hours in which renewable output is low, and is often driven by weather conditions over a given time period. These periods are a driver of needs for firm capacity, making weather-driven input assumptions for load and renewable generation particularly important in the analysis of high renewable grids. For example, Form Energy’s analysis has shown that renewable energy output can fall more than 25% below the 35-year average on a periodic basis, with 100-hour events occurring once every ten years and 50-hour events occurring more than once every two years.[2] These lulls can be due to weather patterns that are not necessarily considered to be extreme for other purposes but should be explicitly considered in the LCR studies.
While these recommendations cannot be easily incorporated into the current technical studies, Form recommends that CAISO begin to consider how to incorporate this type of analysis into future LCR studies. This may also require stakeholder engagement outside of the typical LCR study cycle that begins in October with results adopted in May.
Longer-Term Scenarios Should be Considered in the LCR Studies, Including Accelerated Gas Retirement Scenarios
Currently, CAISO’s LCR studies focus solely on the near term, with a maximum five-year look-ahead. However, the CPUC’s Integrated Resource Planning (IRP) studies examine longer-term portfolio needs out to 2045 and include scenarios with far higher quantities of renewables and storage, and far lower levels of existing natural gas resources, than what CAISO models in LCR studies. This temporal mismatch threatens California's ability to ensure a reliable, least-cost system in the long run, and it fails to send appropriate investment signals to resource developers.
The near-term focus of CAISO’s LCR studies limits CAISO and other stakeholders from understanding the nature of long-run local reliability challenges and the kind of local resources that will be needed to support local reliability and meet state zero carbon goals. We therefore recommend that CAISO’s future LCR studies consider long-term scenarios that align with the CPUC’s IRP portfolios. This approach would make LCR studies a resource that can inform future considerations about resource accreditation or resource performance needed to ensure local reliability. It can also help the CPUC expand its IRP process to optimize for both local and system reliability requirements, potentially lowering ratepayer costs in the process.
Relatedly, California has ambitious natural gas retirement goals, with the CPUC recently adopting an Integrated Resource Plan that includes 2.7 GW of gas retirement by 2030 and 6.6 GW of retirement by 2045. The CPUC is also exploring a high gas retirement sensitivity of 9.3 GW of natural gas retirements by 2035 and 15.9 GW by 2039, which CAISO will be studying in the 2024-25 Transmission Planning Process (TPP).
The CAISO should not only consider these gas retirements in the TPP but should also consider the impact of gas retirements on local capacity needs and the attributes of storage and other firm zero-carbon resources that can substitute for these retirements. In particular, the CAISO can play a unique role in determining where it may be most cost-effective to retire gas. For example, in 2017, the CAISO released the Moorpark Sub-Area Local Capacity Alternative Study, which showed that energy storage could provide an alternative to building a new natural gas plant. This study was conducted on a one-time basis in response to a specific request from the CEC. However, this study showed a concrete path forward for the replacement of gas, which the CPUC could then act on through procurement orders.
The CEC also recently sponsored a study on retiring the Los Angeles Basin. The study showed that 2 GW of long-duration storage and 1.3 GW of 4-hour lithium-ion storage is found to be the least-cost substitute for gas power plants located in disadvantaged communities, lowering system costs by 3%.[3] This study can serve as a blueprint for how other local reliability areas can be studied in the future.
As California moves towards decreasing reliance on gas, the CAISO should look to provide additional information on how to maintain local reliability and decrease costs in specific LCR areas in the long run. This could be conducted in the main LCR study process or could be directed in another workstream to provide additional time for study and stakeholder engagement.
[1] CAISO, CPUC, and CEC, Final Root Cause Analysis: Mid-August 2020 Extreme Heat Wave, January 13, 2021 at 40. Available at: http://www.caiso.com/Documents/Final-RootCause-Analysis-Mid-August-2020-Extreme-Heat-Wave.pdf
[2] Form Energy, Opening Comments of Form Energy, Inc. on Administrative Law Judge’s Ruling Seeking Feedback on Mid-Term Reliability Analysis and Proposed Procurement Requirements submitted to CPUC Rulemaking 20-05-003, March 26, 2021, at 3-7. Available at: https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M376/K501/376501686.PDF
[3] Energy and Environmental Economics (E3), Form Energy, and the University of California San Diego (UCSD), Assessing the Value of Long-Duration Energy Storage in California, December 2023. Available at: https://www.energy.ca.gov/publications/2024/assessing-value-long-duration-energy-storage-california
