California Passes Emergency Law to Maintain Grid Reliability

By Christian Roselund

On 31 July 2022 California Governor Gavin Newsom signed a bill that will create a strategic electric reliability reserve fund, establish a new streamlined processes for approving large clean energy plants, and provide incentives for long-duration energy storage. The legislation would give the power to buy electricity for emergency use to the state’s Department of Water Resources (DWR) and follows on Newsom’s earlier dedication of $5.2 billion for the Strategic Reliability Reserve in the state budget. Environmentalists condemned provisions in the law that could keep fossil fuel-fired plants
online longer.

California suffered rolling blackouts due to insufficient electricity supply in August 2020, and this bill comes in the wake of increasing concerns that California may not be able to maintain reliable electric delivery during summer heat waves. In May 2022, the North American Electric Reliability Corporation published a summer risk assessment that put California, along with the rest of the Western United States at an elevated risk of power outages this summer (for full coverage of this report, see the 31 May U.S. Energy Transition Report). This was followed by a warning by state regulators and California’s grid operator that the state does not have sufficient supply to meet demand during for extreme heat waves.

Governor Newsom has been outspoken about the need to get more generation online to keep the lights on. This includes petitioning the Department of Commerce to issue a negative finding in the pending anti-circumvention case against solar imports from Cambodia, Malaysia, Thailand, and Vietnam on the basis that it was holding up deployment of solar and storage projects needed to maintain reliability.

The cornerstone of the new law is the creation of the Strategic Electric Reliability Fund, which will allow the DWR to purchase, construct, acquire, or contract with zero-emissions generation sources of any size and energy storage facilities 20 megawatts and larger. It also allows the state to extend the life of existing power plants that are scheduled for retirement between 2023 and 2029. Finally, there is a provision to procure emergency and temporary power generation 5 megawatts and larger, but any diesel generators acquired through this provision cannot be used after July 31, 2023.

In another section, the law requires the California Energy Commission to create an incentive program for energy storage projects at least 1 megawatt in capacity that are capable of continuous discharge for eight hours. It also sets up a mechanism for CEC to fast-track emergency generation projects under the California Environmental Quality Act (CEQA), a state law that is considered more strict than federal law.

As California will head into the hottest part of the year in late July, the state has limited time to get any new capacity online to prepare for any heatwaves this summer. However, these moves could allow for significant incremental new electric capacity by the summer of 2023.

News analysis: California passes legislation to avoid blackouts, create ‘insurance policy’ for the grid (Utility Dive)