CPUC adopts lower greenhouse emissions scenario in 2030 IRP

Under intense political pressure not to backslide on the state's nation-leading greenhouse gas reduction goals, the <span/><span/>California Public Utilities Commission voted unanimously Thursday, March 26 to direct utilities and other load-serving entities around the state to submit resource procurement plans through 2030 based on significantly lower emission targets than had been envisioned in a previously proposed decision.

The CPUC's vote to significantly change the decision proposed by an administrative law judge in the state-wide integrated resource planning (IRP) proceeding came a week after influential environmental groups and clean-energy advocates implored Gov. Gavin Newsom (D) to intervene on the matter. They warned him that the CPUC was "poised to reverse course on state climate policy" by adopting the proposed ALJ decision, which they said would establish a resource mix over the next decade that would result in unacceptable greenhouse gas increases.

<span/>The CPUC voted 5-0 to adopt a revised decision that kept the ALJ's same proposed GHG emission target of 46 million metric tons (MMT) from the power sector that load-serving entities (LSE)—such as investor-owned utilities and community choice aggregators—are required to use as they build their procurement plans for each year through 2030.

However, the revised decision also directs each LSE to submit by this summer an alternative planned resource mix based on a significantly lower GHG target of 38 MMT—a level that Southern California Edison and some clean energy groups said was necessary to keep the state on track to meet its legally mandated target of reaching carbon-free power generation by 2045.

The CPUC will then use both of the proposed resource mixes at the two different GHG target levels as it determines an optimal portfolio for the years through 2030 and approves each LSE's procurement plans.

Most of the commissioners said at Thursday's public meeting that they are inclined to push for a portfolio based on the new, more aggressive climate targets.

"I very much support the change that will allow the LSEs to lower their targets," said Commissioner Clifford Rechtschaffen, adding that he hoped "we'll have the ability to adopt the lower target" once the CPUC receives the two different procurement plans from each LSE.

CPUC President Marybel Batjer appeared exuberant as she cast her vote to adopt what she called "a very, very good decision" growing out of what she recognized as the hugely important and complex IRP proceeding.

"I believe this will keep us on track to meet our 2045 goals. And that's no small feat, for the people of California and for the world," she said.

While many clean energy advocates supported the CPUC's inclusion of the 38 MMT emissions target, most of them were pushing for an even-lower 30 MMT target that they say is more in line with the state's long-term goal of reaching zero emissions by 2045.

But even at the higher GHG target of 46 MMT, the proposed resource mix includes state-wide procurement of 25,000 megawatts of new renewable resources and energy storage through 2030. That includes a whopping 8,000 MW of new solar by 2023 and 8,900 MW of battery storage by 2030.

Commissioner Liane Randolph, who is leading the IRP proceeding, noted that solar procurement in the state would double by 2030 and the massive deployment of batteries would represent eight times more than the total amount of battery capacity in the nation as of last year. The decision noted that renewable and storage procurements at that level—even under the higher GHG target scenario—would push California into uncharted waters as it seeks to maintain reliability at a reasonable cost while also trying to reach the 2045 zero-carbon target.

CPUC staff estimated the procurement of the new generation portfolio at the higher 46 MMT target will cost more than $45 billion annually through 2030, with procurements necessary to hit the 38 MMT target estimated to cost an additional $1 billion.

Nevertheless, even with the massive renewable procurements, emissions from the sector are expected to rise slightly from 38 MMT in 2022 to 41 MMT in 2030 as electricity demand continues to rise and nearly all of the state's natural gas-fired generation remains in service to support reliability, according to the IRP decision.

Further, the decision notes that it will become increasingly challenging to hit further GHG reduction targets in the years after 2030 as electricity demand grows with wider electric vehicle adoption and electrification of buildings.

Given the huge costs and operational risks of procuring such massive amounts of renewables and storage through 2030, the revised decision said it was appropriate to keep the 46 MMT target but to use the lower 38 MMT target to compare the two scenarios and allow LSEs to shoot for a lower-carbon resource mix.

"We affirm that the selection of a 46 MMT GHG target for 2030 does not preclude the commission from adopting a lower target in the 2019-2020 preferred system portfolio (PSP) after consideration of individual LSE IRPs," the decision adopted Thursday states.

"In response to continuing concerns of numerous parties that the 46 MMT target is still too high, given uncertainties, we will also require all LSEs, when filing their individual IRPs, to submit at least two portfolios: one conforming to the 46 MMT planning target for the sector, and a second conforming to a 38 MMT target in 2030," the CPUC wrote.

"Rather than spending time doing further modeling and analysis now, having LSEs submit their plans toward a 38 MMT will allow the commission to conduct a more practical (and less theoretical) analysis of what actual 38 MMT portfolios might look like, from the perspective of the LSEs doing the planning and procuring," the CPUC continued.

Analysis of the LSEs' specific procurement plans also will help address concerns raised by the California Independent System Operator that the CPUC's 46 MMT resource mix may not support reliability. The grid operator also said that resource plan could not be used in CAISO's transmission planning process because it did not show the particular locations or characteristics of new generation or battery resources.

Along with the huge procurements of solar and battery storage, the IRP also calls for purchases of increasing amounts of wind generation and about 1,000 MW of long-duration storage such as pumped storage hydropower, hydrogen or next-generation flow batteries.

In addition, it calls for further study of offshore wind and increasing amounts of out-of-state wind resources, along with the possible procurement of more long-duration storage.

Reprinted from The Energy Daily. For more comprehensive daily coverage of US energy policy, regulatory, and business trends from IHS Markit, visit The Energy Daily website.

Jim Day is a Senior Journalist for Energy at IHS Markit.

Posted 14 April 2020

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.