CPUC Issues Net-Qualifying Capacity Values to Be Used for Mid-Term Reliability Procurement

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In June 2021, the California Public Utilities Commission (Commission) issued its Mid-Term Reliability Procurement Decision, Decision (D.) 21-06-035, which directed load-serving entities subject to its jurisdiction (investor-owned utilities, community choice aggregators, and energy service providers) to procure at least 11,500 megawatts (MW) of net-qualifying capacity (NQC) for reliability for the period 2023 through 2026.  The decision established cumulative annual procurement requirements: 2,000 MW in 2023, 6,000 MW in 2024, 1,500 MW in 2025, and 2,000 in 2026.  The decision also states that the Commission expects all of the resources procured pursuant to that decision to be zero-emitting, unless they otherwise qualify under renewables portfolio standard eligibility requirements (biomass, for example).

In the past, the Commission’s procurement orders have generally set forth procurement requirements based upon nameplate capacity.  D.21-06-035, however, establishes procurement requirements for NQC.  That represents the value that a particular resource contributes to a load-serving entity’s resource adequacy requirements.  California’s resource adequacy program requires that load-serving entities procure a certain amount of capacity, including flexible capacity, during each month to ensure system reliability.  The amount of resource adequacy capacity that a resource can provide is based upon various Commission methodologies that establish the “qualifying capacity” of various types of resources (solar, natural gas, energy storage, etc.), and then further adjusts that value based upon deliverability studies performed by the California ISO to determine whether that qualifying capacity is deliverable to load at peak.  The final result of these calculations is a resource’s NQC.

However, rather than rely on the methodologies it had adopted to calculate NQC for resource adequacy requirements, the Commission in D.21-06-035 stated that by August 31, 2021, it would publish incremental “effective load carrying capability” or ELCC values to be used for the 2023 and 2024 procurement requirements, to be used for solar, solar plus storage of various durations and configurations, and wind in various regions.  The ELCC methodology had previously been used by the Commission previously for solar and wind, but not for energy storage (or storage combined with solar).  However, the ELCC methodology previously (and currently) used by the Commission for resource adequacy requirements uses monthly average ELCCs, and results in different values than the annual incremental ELCCs to be calculated pursuant to D.21-06-035.

On September 10, 2021, Energy Division staff issued the ELCCs to be used for wind, solar, battery storage, and storage paired with renewables, for the 2023 and 2024 procurement requirements.  Staff also issued indicative information for those resources for 2025 and 2026 procurements, as well as for pumped storage hydro, out-of-state wind, and offshore wind for 2026.  According to Energy Division staff, final values for 2025 and 2026 will be issued by the end of next year.

The ELCCs provided by staff are set forth in an “Incremental ELCC Study for Mid-Term Reliability Procurement” (Study) prepared by consultants engaged by the Commission—E3 and Astrapé, which was also provided by Energy Division staff.  The incremental ELCCs are set out as percentages (for example, the 2023 solar ELCC is 7.8%), which represent the percentage of a resource’s nameplate capacity that can be counted towards a load-serving entity’s D.21-06-035 procurement obligation (e.g., 100 MWs of solar counts as 7.8 MW towards the 2023 procurement obligation).

For other resources, the Commission directed load-serving entities to use the existing resource adequacy NQC counting rules in place at the time the procurement contract is executed.

The ELCC methodology consists of calculating the reliability improvement provided to the system by incremental resources based upon the amount of additional load that can be served because of that reliability improvement.  That contribution can shift over time, as more and more of a particular resource is added to the system.  For example, the Study calculates that the ELCC for a four-hour battery declines from 96.3% in 2023 to 69% (indicative, not final) in 2026.  For energy storage, these ELCC values are lower than the value those resources are currently given in the resource adequacy program.  The values for six- and eight-hour batteries are higher, but similarly decline over time.

Energy Division staff also made it clear that “at this stage,” the ELCC values provided on September 10, 2021 would only be used for purposes of meeting the procurement requirements of D.21-06-035.  For example, these ELCC values will not be used to calculate a load-serving entity’s compliance with its resource adequacy requirements.

The Energy Division staff memo and the Study can be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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