Why California is facing a Clean Energy Conundrum

A chronic logjam in California Independent System Operator(CAISO) interconnection queue and continuing supply chain problems will create a challenge for California to meet a lot of its medium-term targets for clean energy deployment - and will also distort the state's power market operations in the meantime - according to the latest assessment from specialist advisory firm Ascend Analytics.

While these two main constraints on developing new resources persist, the California Public Utilities Commission (CPUC) widened the looming gap between the state’s goals and what it is actually likely to be achievable in February when it added 4GW to its Mid-Term Reliability (MTR) order. This will oblige load serving entities (LSEs) in the state to procure 15.5GW of clean energy by 2026/27.

“There's not enough, there's not going to be enough [clean energy] resources to meet some of these requirements,” confirmed Brent Nelson, Ascend Analytics Managing Director of Markets & Strategy.

RA and REC prices

One unsurprising consequence of this worsening mismatch is that prices of resource adequacy (RA) contracts - particularly those with near term online dates- have gone through the roof, while REC prices have also experienced double digit increases (see Ascend Analytics graphs).

Moreover, there is a little prospect of pressure on the interconnection queues or supply chains easing significantly in the near term.

Developers now complain that it is taking up to eight years to take a project from the initial planning stage to commercial operation - largely due to delays in processing the huge increases in applications for interconnection over the past two years - and all evidence suggests the problem will get worse in the short term.

To read the full story, login into Voltility.net. Article written by Andrew Cavenagh, October 16, 2023.

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