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California’s Drought Tests Its Climate Goals

California’s Drought Tests Its Climate Goals

Wednesday, 16 June, 2021 - 03:15

I see the forecast for California is hot and dry again.


PG&E Corp., having emerged last year from bankruptcy brought on by wildfires in northern California, has sold off as summer rolls around and the risk of blazes sparked by powerlines rises once more. About 85% of California is experiencing “extreme” drought or worse, and dry conditions stretch across much of the West.


This challenge extends beyond just one utility, though. The drought is a test of California’s decarbonization plans; the sort of extreme weather those plans aim to address in the first place.


Hot, dry weather boosts demand for power, chiefly air conditioning. It also constrains supply. The three West Coast states are home to roughly half the country’s hydropower capacity. The last time California experienced prolonged drought, from around 2012 to 2017, hydropower’s share of its electricity generation plunged from more than a fifth to just 7%.


Using more natural gas runs counter to California’s renewable-power goals. But blackouts, such as those last August, run counter to political careers and life in general. Back then, unusually fierce heat across the West boosted demand to an extreme level and limited imports from neighbors. California Independent System Operator, or CAISO, which operates the grid, said in a recent assessment that supply should be a bit better this year but warns another heatwave could leave the state short again. Reduced hydropower is one element of that: Water in major reservoirs is down to 70% of normal levels , compared with 101% last year.


Those blackouts were relatively brief; a crisis of peak power rather than power supply in general. The critical hours in California’s power market are between 6 p.m. and 9 p.m. Peak demand for grid power used to be in the late afternoon, but a roughly tenfold increase in the state’s residential solar capacity over the past decade has shifted it back a few hours to when the sun goes down. Then, there is a large, rapid increase in demand for electricity, requiring flexible plants that can be switched on at will — which typically means gas. This demand is even more pronounced if other resources, such as hydropower or grid imports, are constrained.


Yet California’s gas fleet is shrinking. Apart from the state’s renewables targets deterring new capacity, the saturation of solar power in the middle of the day has narrowed the window for plants of any type to make money. Gas-turbines that used to provide baseload power throughout the day might now only be switched on for a few hours in the evening, more like peaking plants.


Incumbent generators with efficient gas-fired plants can do well. The Calpine Corp. fleet acquired by Energy Capital Partners LLC in 2018 springs to mind, especially as it was twinned with zero-carbon geothermal plants in northern California. But the case for running a gas plant in California, let alone opening one, gets narrower by the year.


Which is precisely why California is paying more of them just to stay online. Most notably, CAISO has designated two gas-fired cogeneration plants for “reliability must-run” service — contracted to stay open in case they’re needed — in the past six months. These are the first such contracts on a system-wide basis, rather than addressing local grid constraints. That, plus the fact that these two facilities are more than 30 years old and provide less than 290 megawatts altogether, gives a sense of how spooked the grid operator was by last year’s blackouts.


More such contracts are likely, especially if there’s an extended drought. The impending closure of the state’s last nuclear power plant will add further pressure by 2025. Keeping older, fuel-hungry plants online is especially bad in terms of emissions.


Batteries are the obvious alternative in a solar-saturated state, shifting excess supply in the afternoon to when it’s needed at night. By September, California should have an extra 1.5 gigawatts of battery storage online compared with last summer. That could make a difference in a pinch. Unlike, say, Texas’ extended, systemwide failure during a different type of extreme weather, California’s blackouts resulted from a relatively short imbalance of supply and demand. More batteries, twinned with wider demand response measures, could help avoid the lights going out even for a few hours.


Batteries are also expensive, however, so they represent more of a long-term solution. In the meantime, California must balance its climate goals with keeping the lights on — even as climate change adds its own peculiar stress to both supply and demand.


Bloomberg


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