California's Slice of Day Framework: Understanding Impacts on Resource Adequacy and Resource Value

California's Slice of Day Framework: Understanding Impacts on Resource Adequacy and Resource Value

Key Takeaways

  • California's Slice of Day (SOD) framework presents a major change to resource adequacy (RA) requirements for load serving entities (LSEs). RA obligations are moving from a simple monthly target to a 12-month 24-hour target. Load Serving Entities (LSEs) must adjust resource plans to meet the new requirements that start in 2025.  
  • The SOD framework was designed to simplify RA accounting and ensure that storage resources had adequate energy for charging. However, LSEs and independent power producers (IPPs) have struggled to understand the nuances of the new requirements, especially given the multiple updates to SOD from the California Public Utility Commission (CPUC) over the past year.  
  • RA contributions from energy storage in SOD have changed dramatically, creating more complexity and uncertainty in the value of storage. SOD has significantly changed the RA value of standalone storage relative to previous accounting frameworks.
  • By facilitating a consistent and streamlined view of RA value between capacity expansion modeling and RA accounting, as well as expediting the monthly filing process, the Ascend PowerSIMM™ Slice of Day tool allows LSEs to save time and money while improving the quality of resource planning processes.

Ascend's Comprehensive and Strategic Solution for RA Compliance and Procurement

Adjusting to the new SOD framework can be complicated and confusing without tools to simplify the process. Ascend’s PowerSIMMTM Slice of Day solution provides the analytics to optimize RA SOD reporting and includes key features such as:

  • Enhanced Filing Efficiency: PowerSIMM™ outputs can be used to quickly populate CPUC RA Showing Templates, reducing the time and effort needed for monthly filings.
  • Resource Optimization: The solution supports modeling of battery storage and CAM peaker unit operations, enabling LSEs to identify cost-effective ways to meet hourly RA requirements and minimize RA procurement costs.
  • Integration with Resource Planning: PowerSIMM™ integrates the RA SOD module with long-term capacity expansion models to provide optimal decision making in the RA SOD construct.

As LSEs analyze options to meet RA requirements, they need to model potential additions to existing portfolios to understand how it impacts their RA position in the SOD context. Figure 1 shows the RA position in a month-hour grid with and without energy storage in the model. Initially, there are shortfalls in late afternoon during summer months. The energy storage shifts the midday long positions to the evening hours when it is needed.  

A screenshot of a tableDescription automatically generated
Figure 1: RA SOD position by month-hour without energy storage (top chart) and with energy storage (bottom chart)

Diving deeper into the month of August, Figure 2 shows the detailed RA positions where solar capacity causes a long position in the midday hours that can be shifted with energy storage. The RA requirement peaks during the 18:00 hour when storage provides the necessary capacity to meet the requirement.

A graph of a diagramDescription automatically generated with medium confidence
Figure 2: RA SOD position by resource type for August with energy storage shifting RA from midday to evening hours to meet the peak RA requirement.

California’s new SOD framework adds reporting burdens to LSEs and creates a need for hourly long-term resource planning. PowerSIMM™ Slice of Day natively models the new economics of capacity by including the RA requirements within the modeling environment, enabling LSEs to plan resources effectively while mitigating costs and compliance risks.

Background on the Slice of Day Methodology  

In 2022, the California Public Utilities Commission (CPUC) reformed its RA accounting methodology to better account for the contributions of variable energy resources and duration limited resources. The CPUC transitioned to a month-hour '12x24 - Slice of Day' approach meant to reflect a more comprehensive view of grid reliability. The methodology employs:

  • Exceedance Profiles: Location-specific and resource-specific profiles assess the contributions of variable energy resources, such as solar and wind, across all hours.
  • Charging Energy Requirements: Explicit modeling of storage charging needs ensures accurate representation of storage capabilities and limitations.

The SOD framework requires LSEs to demonstrate that they have enough capacity to satisfy their gross load profile, including planning reserve margin, during all 24 hours on the California Independent System Operator’s (CAISO) 'worst day,' defined as the day of the month that contains the hour with the highest coincident peak load forecast in that month. Future iterations of the SOD may define the “worst day” differently.

SOD represents a major shift in the RA construct for CPUC regulated LSEs by moving from a monthly RA requirement based on ELCC accredited capacity values to an hourly requirement based on exceedance values. LSEs must adjust to the new filing requirements and understand how the changes affect planning decisions in long-term planning. SOD also impacts resource value – which can vary widely to different LSEs based on how it fits into the specific portfolio of any given LSE.

Slice-of-Day Challenges for Load Serving Entities

Though the SOD framework was conceived to produce a straightforward approach to accounting for renewable and storage contributions to RA, implementing SOD has revealed several issues for LSEs:

  • Inability to transact RA on an hour-by-hour basis: The SOD framework may show RA shortfalls for particular hours where the previous RA program only provided a monthly shortage. This more granular outcome in SOD provides better information regarding when LSEs need more capacity and which resources can fill the gap. But the shift from monthly RA obligations to month-hour obligations lead to a misalignment between obligations and procurements because RA procurements must be in monthly blocks. The result is procurements of RA in that span short and long hours.  
  • Disconnect between SOD and interconnection: CAISO interconnection studies only consider resource deliverability during peak demand hours, but an LSE may need a given resource to provide deliverability during other time periods. At present, there is no way to certify the deliverability of duration-limited resources for SOD compliance in non-peak hours.
  • SOD lacks the capability to account for the additional value from storage with duration longer than 12 hours: While long duration storage technology approaches durations longer than 12-hours, the 24-hour window of the SOD methodology cannot account for anything beyond 12 hours of charging and 12 hours of discharging. Modeling the reliability value of longer duration storage in SOD will require changes in treatment of storage in the models to avoid undervaluing storage with the ability to shift more than 12 hours of RA contributions.  
  • RA accounting becomes more complicated: SOD RA accounting has proven more complicated than initially expected, especially because the framework keeps evolving. To date, CPUC has released more than 30 versions of the RA Showing Template, an Excel based file used by LSEs to show compliance with the RA SOD. Consequently, LSEs still have had numerous questions about the accounting mechanism and have frequently sought guidance from the CPUC and the CAISO during the 2024 test year, in which LSEs had to dual-file RA compliance, a binding filing for outgoing RA program, and a non-binding practice filing for SOD. The new SOD accounting will become active in 2025. 

Understanding Value by Resource Type in Slice of Day  

The value (and price) of RA for each month-hour slice will be a function of how short the system is from the target reserve quantity for that specific month-hour. The revenue that a resource receives in turn will reflect how much it improves grid reliability during these strained month-hours, like previous ELCC-derived results. When looking to forecast the value of RA, Ascend evolves capacity prices forward in line with forecasted energy revenues and cost trajectory for storage while also accounting for the spreading of RA value across more hours under SOD RA.  

Solar and Wind

The exceedance methodology creates a month-hour matrix that determines RA contributions from solar and wind production based upon historical data. For example, a 70% exceedance value states a renewable resource can reasonably generate the quantity of power observed in 70% of historical time intervals for a given month-hour. For a solar resource that has a 70% exceedance value of 100 MW at 2pm, the data show at least 100 MW of generation in 70% of historical observations. Each resource’s value depends on its region-specific generation. For example:  

  • Southern California solar receives 30% more RA value than solar in Northern California due to more favorable solar generation.  
  • Wind located in New Mexico gets three times more RA value than in-state wind.  

In general, LSEs and other stakeholders have indicated that the exceedance methodology reflects the specifics of the location and the resource.

Energy Storage

SOD has significantly reduced the RA value of standalone storage relative to previous accounting frameworks. In SOD, energy storage provides RA value by shifting excess RA to hours when the RA capacity is needed. Previously, LSEs could count four-hour duration standalone storage at the full nameplate value towards meeting their RA requirements. However, under the SOD framework, storage's RA contribution lies in its ability to shift RA value from hours with excess RA to shortfall hours. In this manner, the SOD framework ensures storage has charging resources to provide RA value.

For instance, under SOD:

  • A 10 MW four-hour battery received 10 MW of RA value in the previous framework.
  • The same 10 MW four-hour battery does not provide RA value directly to an LSE. Instead, the 10 MW battery may provide value to an LSE if there are opportunities to shift excess RA to cover shortfalls.  
  • Four-hour duration storage can cycle twice daily in the RA Showing Template allowing batteries to potentially shift two four-hour blocks of RA.
  • Storage exceeding 12 hours of duration remains undervalued, as the framework does not account for contributions beyond the 24-hour window.

Many LSEs procured energy storage as part of the Midterm Reliability Procurement Order. Under the SOD, these LSEs now find that they are oversubscribed on storage, leading them to focus on acquiring RA-generating resources such as wind, geothermal, gas, or solar. 

In terms of battery storage optimization, the CPUC RA Showing Template offers limited capabilities. The current version of the template cannot optimize RA shifting with energy storage if the LSE has an hour with RA shortfall.  

Thermal Generation

Thermal generation receives RA accreditation based on its maximum output in SOD. A current exception to this rule is gas peaker plants that fall under the Cost Allocation Mechanism (CAM). Per CPUC requirements, CAM peaker units have a nine-hour daily run limitation. Therefore, the RA Showing Template only allows CAM peakers to provide RA for up to nine hours but does not include tools to optimally determine the nine hours when the resource provides the most value in coordination with energy storage and other portfolio resources.  

Summary

The new RA SOD requires that LSEs adjust to a new method of accounting for resource contribution to RA. Given the changes in how resources will be accredited, LSEs should integrate the RA SOD methodology in resource evaluation and planning decisions. PowerSIMM’s RA SOD module provides the necessary tools for the integration of RA SOD accounting with models for evaluation and planning.  

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California's Slice of Day Framework: Understanding Impacts on Resource Adequacy and Resource Value

December 11, 2024

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Key Takeaways

  • California's Slice of Day (SOD) framework presents a major change to resource adequacy (RA) requirements for load serving entities (LSEs). RA obligations are moving from a simple monthly target to a 12-month 24-hour target. Load Serving Entities (LSEs) must adjust resource plans to meet the new requirements that start in 2025.  
  • The SOD framework was designed to simplify RA accounting and ensure that storage resources had adequate energy for charging. However, LSEs and independent power producers (IPPs) have struggled to understand the nuances of the new requirements, especially given the multiple updates to SOD from the California Public Utility Commission (CPUC) over the past year.  
  • RA contributions from energy storage in SOD have changed dramatically, creating more complexity and uncertainty in the value of storage. SOD has significantly changed the RA value of standalone storage relative to previous accounting frameworks.
  • By facilitating a consistent and streamlined view of RA value between capacity expansion modeling and RA accounting, as well as expediting the monthly filing process, the Ascend PowerSIMM™ Slice of Day tool allows LSEs to save time and money while improving the quality of resource planning processes.

Ascend's Comprehensive and Strategic Solution for RA Compliance and Procurement

Adjusting to the new SOD framework can be complicated and confusing without tools to simplify the process. Ascend’s PowerSIMMTM Slice of Day solution provides the analytics to optimize RA SOD reporting and includes key features such as:

  • Enhanced Filing Efficiency: PowerSIMM™ outputs can be used to quickly populate CPUC RA Showing Templates, reducing the time and effort needed for monthly filings.
  • Resource Optimization: The solution supports modeling of battery storage and CAM peaker unit operations, enabling LSEs to identify cost-effective ways to meet hourly RA requirements and minimize RA procurement costs.
  • Integration with Resource Planning: PowerSIMM™ integrates the RA SOD module with long-term capacity expansion models to provide optimal decision making in the RA SOD construct.

As LSEs analyze options to meet RA requirements, they need to model potential additions to existing portfolios to understand how it impacts their RA position in the SOD context. Figure 1 shows the RA position in a month-hour grid with and without energy storage in the model. Initially, there are shortfalls in late afternoon during summer months. The energy storage shifts the midday long positions to the evening hours when it is needed.  

A screenshot of a tableDescription automatically generated
Figure 1: RA SOD position by month-hour without energy storage (top chart) and with energy storage (bottom chart)

Diving deeper into the month of August, Figure 2 shows the detailed RA positions where solar capacity causes a long position in the midday hours that can be shifted with energy storage. The RA requirement peaks during the 18:00 hour when storage provides the necessary capacity to meet the requirement.

A graph of a diagramDescription automatically generated with medium confidence
Figure 2: RA SOD position by resource type for August with energy storage shifting RA from midday to evening hours to meet the peak RA requirement.

California’s new SOD framework adds reporting burdens to LSEs and creates a need for hourly long-term resource planning. PowerSIMM™ Slice of Day natively models the new economics of capacity by including the RA requirements within the modeling environment, enabling LSEs to plan resources effectively while mitigating costs and compliance risks.

Background on the Slice of Day Methodology  

In 2022, the California Public Utilities Commission (CPUC) reformed its RA accounting methodology to better account for the contributions of variable energy resources and duration limited resources. The CPUC transitioned to a month-hour '12x24 - Slice of Day' approach meant to reflect a more comprehensive view of grid reliability. The methodology employs:

  • Exceedance Profiles: Location-specific and resource-specific profiles assess the contributions of variable energy resources, such as solar and wind, across all hours.
  • Charging Energy Requirements: Explicit modeling of storage charging needs ensures accurate representation of storage capabilities and limitations.

The SOD framework requires LSEs to demonstrate that they have enough capacity to satisfy their gross load profile, including planning reserve margin, during all 24 hours on the California Independent System Operator’s (CAISO) 'worst day,' defined as the day of the month that contains the hour with the highest coincident peak load forecast in that month. Future iterations of the SOD may define the “worst day” differently.

SOD represents a major shift in the RA construct for CPUC regulated LSEs by moving from a monthly RA requirement based on ELCC accredited capacity values to an hourly requirement based on exceedance values. LSEs must adjust to the new filing requirements and understand how the changes affect planning decisions in long-term planning. SOD also impacts resource value – which can vary widely to different LSEs based on how it fits into the specific portfolio of any given LSE.

Slice-of-Day Challenges for Load Serving Entities

Though the SOD framework was conceived to produce a straightforward approach to accounting for renewable and storage contributions to RA, implementing SOD has revealed several issues for LSEs:

  • Inability to transact RA on an hour-by-hour basis: The SOD framework may show RA shortfalls for particular hours where the previous RA program only provided a monthly shortage. This more granular outcome in SOD provides better information regarding when LSEs need more capacity and which resources can fill the gap. But the shift from monthly RA obligations to month-hour obligations lead to a misalignment between obligations and procurements because RA procurements must be in monthly blocks. The result is procurements of RA in that span short and long hours.  
  • Disconnect between SOD and interconnection: CAISO interconnection studies only consider resource deliverability during peak demand hours, but an LSE may need a given resource to provide deliverability during other time periods. At present, there is no way to certify the deliverability of duration-limited resources for SOD compliance in non-peak hours.
  • SOD lacks the capability to account for the additional value from storage with duration longer than 12 hours: While long duration storage technology approaches durations longer than 12-hours, the 24-hour window of the SOD methodology cannot account for anything beyond 12 hours of charging and 12 hours of discharging. Modeling the reliability value of longer duration storage in SOD will require changes in treatment of storage in the models to avoid undervaluing storage with the ability to shift more than 12 hours of RA contributions.  
  • RA accounting becomes more complicated: SOD RA accounting has proven more complicated than initially expected, especially because the framework keeps evolving. To date, CPUC has released more than 30 versions of the RA Showing Template, an Excel based file used by LSEs to show compliance with the RA SOD. Consequently, LSEs still have had numerous questions about the accounting mechanism and have frequently sought guidance from the CPUC and the CAISO during the 2024 test year, in which LSEs had to dual-file RA compliance, a binding filing for outgoing RA program, and a non-binding practice filing for SOD. The new SOD accounting will become active in 2025. 

Understanding Value by Resource Type in Slice of Day  

The value (and price) of RA for each month-hour slice will be a function of how short the system is from the target reserve quantity for that specific month-hour. The revenue that a resource receives in turn will reflect how much it improves grid reliability during these strained month-hours, like previous ELCC-derived results. When looking to forecast the value of RA, Ascend evolves capacity prices forward in line with forecasted energy revenues and cost trajectory for storage while also accounting for the spreading of RA value across more hours under SOD RA.  

Solar and Wind

The exceedance methodology creates a month-hour matrix that determines RA contributions from solar and wind production based upon historical data. For example, a 70% exceedance value states a renewable resource can reasonably generate the quantity of power observed in 70% of historical time intervals for a given month-hour. For a solar resource that has a 70% exceedance value of 100 MW at 2pm, the data show at least 100 MW of generation in 70% of historical observations. Each resource’s value depends on its region-specific generation. For example:  

  • Southern California solar receives 30% more RA value than solar in Northern California due to more favorable solar generation.  
  • Wind located in New Mexico gets three times more RA value than in-state wind.  

In general, LSEs and other stakeholders have indicated that the exceedance methodology reflects the specifics of the location and the resource.

Energy Storage

SOD has significantly reduced the RA value of standalone storage relative to previous accounting frameworks. In SOD, energy storage provides RA value by shifting excess RA to hours when the RA capacity is needed. Previously, LSEs could count four-hour duration standalone storage at the full nameplate value towards meeting their RA requirements. However, under the SOD framework, storage's RA contribution lies in its ability to shift RA value from hours with excess RA to shortfall hours. In this manner, the SOD framework ensures storage has charging resources to provide RA value.

For instance, under SOD:

  • A 10 MW four-hour battery received 10 MW of RA value in the previous framework.
  • The same 10 MW four-hour battery does not provide RA value directly to an LSE. Instead, the 10 MW battery may provide value to an LSE if there are opportunities to shift excess RA to cover shortfalls.  
  • Four-hour duration storage can cycle twice daily in the RA Showing Template allowing batteries to potentially shift two four-hour blocks of RA.
  • Storage exceeding 12 hours of duration remains undervalued, as the framework does not account for contributions beyond the 24-hour window.

Many LSEs procured energy storage as part of the Midterm Reliability Procurement Order. Under the SOD, these LSEs now find that they are oversubscribed on storage, leading them to focus on acquiring RA-generating resources such as wind, geothermal, gas, or solar. 

In terms of battery storage optimization, the CPUC RA Showing Template offers limited capabilities. The current version of the template cannot optimize RA shifting with energy storage if the LSE has an hour with RA shortfall.  

Thermal Generation

Thermal generation receives RA accreditation based on its maximum output in SOD. A current exception to this rule is gas peaker plants that fall under the Cost Allocation Mechanism (CAM). Per CPUC requirements, CAM peaker units have a nine-hour daily run limitation. Therefore, the RA Showing Template only allows CAM peakers to provide RA for up to nine hours but does not include tools to optimally determine the nine hours when the resource provides the most value in coordination with energy storage and other portfolio resources.  

Summary

The new RA SOD requires that LSEs adjust to a new method of accounting for resource contribution to RA. Given the changes in how resources will be accredited, LSEs should integrate the RA SOD methodology in resource evaluation and planning decisions. PowerSIMM’s RA SOD module provides the necessary tools for the integration of RA SOD accounting with models for evaluation and planning.  

About Ascend Analytics

Ascend Analytics is the leader provider of market intelligence and analytics solutions for the energy transition. The company's offerings enable decision makers in power development and supply procurement to maximize the value of planning, operating, and managing risk for renewable, storage, and other assets. From real-time to 30-year horizons, their forecasts and insights are at the foundation of over $50 billion in project financing assessments.  Ascend provides energy market stakeholders with the clarity and confidence to successfully navigate the rapidly shifting energy landscape.

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