California ISO enters must-run contracts, approves measures to shore up reliability

Dive Brief:

The California ISO's board of directors approved several measures last week aimed at maintaining system reliability, including entering into two reliability must-run contracts with NRG California South to save the company's Ellwood and Ormond Beach Power plants.
NRG announced its intent to close the plants in March, citing "economic reasons." Gas plants have struggled in California as the state turns toward renewables, but in this instance the ISO determined those two plants were necessary for reliability.
The board adopted a limited, interim modification to the must-run agreements to enable the grid operator "to terminate current agreements and re-designate the units based on a comprehensive agreement" and also advanced progress on the ISO's plan to provide reliability coordinator services.

Dive Insight:

The California ISO board signed off on a slate of decisions last week, and the Ellwood and Ormond Beach reliability must-run contracts stood out as a sign of growing pains as the state shifts to renewables.

The state is targeting 50% renewables by 2030 and discussing raising it to 100%. As renewable energy drives down prices, gas plants are struggling. Calpine this year nixed a planned 255 MW gas-fired plant, citing a lack of power demand and changes to the state's energy policies.

But while NRG's two plants may not be making money, there isn't sufficient capacity in those areas for the plants to retire. That means RMR contracts are necessary, which will wind up costing customers more money.

The board in a statement said that, as with all plant retirements, "the ISO conducted a study to determine the impact on the grid and concluded the retirements would leave the local area deficient in capacity needed to reliably serve load in 2019."

In January, the ISO announced it would begin acting as its own reliability coordinator, abandoning the services of Peak Reliability. CAISO also said it would offer reliability services to any transmission owner interested, and promised to do it for less.

The board also approved seven changes to the generator interconnection process, including raising the interconnection study deposits to $50,000 from $10,000. Directors also approved a new way of accounting for greenhouse gas emissions of Western Energy Imbalance Market energy transfers into the ISO balancing area.