California Power: The Utilities Have Been Lying
Recently I was referred to a presentation by Clean Coalition regarding their investigation into the August 14th & 15th, 2020 rolling blackouts in California. The discussion is lengthy though worthwhile. If you prefer reading the slides, here you go.
Bottom Line Up Front: Lack of capacity did not cause the blackouts; rather the blackouts resulted from artificial and inappropriate demand placed on the system. By this, I mean “investors” ordered 553% excess over that which the blackouts shed while these exports received priority over California ISO based customers. Had this not happened, no blackouts would have occurred. The demand including the murky exports tripped into emergency funding rates at extortionist prices. The market needs transparency and regulation while the source of market irregularities should be presumed nefarious for investigation so as to permit subpoena power to illuminate the details of actions therein.
Nefarious intent can be presumed as reasonable grounds to initiate legal investigation as impact was severe, financial tools were causal, and emergency power rates meant large monetary flows suggesting someone made money.
Below I will outline Clean Coalition’s points regarding what I can only compare to a Martin Shkreli Pharma Bro Insulin type scam done by or permitted by the California Independent System Operator (CAISO) Corporation power utility collective.
First, I would like to note what I find as a few errors with Clean Coalition from their presentation. I do this so we can parse these out and use alternate concepts that meet the same intent while not opening debate vulnerabilities. Note all the errors I found in Clean Coalition’s presentation are cosmetic not substantive.
The Clean Coalition favors localized power generation and storage. This is a good thing. It should not be solely relied upon, however, nor is it resilient. Such is more survivable systemically as any failures only affect a smaller area, but more places of generation open more chances for failures. On the flip, it reduces line dependency. Clean Coalition puts localization in contrast to transmission. These should not be OR decisions. Rather they should be AND activities as more connections makes for better survivability as more sources can share load for failed or degraded areas. These are also complimentary as any smaller failure is less likely to overwhelm a system and cause cascade compared to a large failure from more centralized designs.
The word resiliency is the second problem. What they consider resiliency is actually survivability. Should a node suffer a hit, the system is degraded even if it survives. Should a node suffer a hit, the system is degraded even if consumers never notice a hit has occurred. As the system is still running, it has survived. Survivability can lead to resiliency though it is not resilient in of itself. To be resilient, it needs to recover itself so as to no longer be degraded. Consider starfish, salamanders, newts, lizards. These creatures can lose appendages. They survive. They also regrow appendages; they’re resilient. Consider a weight lifter working out. Her or his muscles are getting damaged. S/he survives and recovers growing back stronger than original. Resiliency is the growing back part. We need to use proper terms. In this case localized power production, especially if also on greater transmission networks, is more survivable not resilient.
As Tom Gilovich teaches us via Jonathan Haidt,
“The crucial insight here comes from psychologist Tom Gilovich at Cornell, who says that when we want to believe a proposition, we ask, ‘Can I believe it?’ — and we look only for evidence that the proposition might be true. If we find a single piece of evidence then we’re done. We stop. We have a reason we can trot out to support our belief. But if we don’t want to believe a proposition, we ask, ‘Must I believe it?’ — and we look for an escape hatch, a single reason why maybe, just maybe, the proposition is false.”
While arguing our points, we need to be sure we’re accurate and precise. If we have multiple points, we need to verify ALL or we should PRESENT LESS so as to reduce chances of one being off thus negating the argument in total in the mind of the reluctant recipient. The willing recipient doesn’t need all the points. Please mentally find/replace resilient with survivable when viewing Clean Coalition. Adapt your own argument accordingly.
Regarding the transmission line versus local competition, we should take a moment to consider why Clean Coalition argues this way. I assume this is for two reasons. The first is that should a town be receiving power, why would they be interested in zoning & funding local power generation. The answer is that too much efficiency actually buys risk. Redundancy yields survivability. I suspect Clean Coalition fears consumers and municipalities will choose short term savings over redundancy. Such creates a competition between having high power transmission lines and having local generation while also giving an advantage of inertia to the lines. The second reason I believe Clean Coalition argues as they do is that consumers pay for transmission as a set fee regardless of transmission range and cost. Thus power companies preserve an asymmetric information advantage over the consumer while not themselves feeling the transmission pinch; they pass the entirety of transmission cost along. They gain on top of this as users pay as if they were receiving the longest range transmission. Hence there is motive for companies to rely on transmission though hide ranges and expenses. Meanwhile, customers perceive distributed local production as more expensive than it actually is as this transmission fee gets wrongly applies to such as seen in slide 11 above. This could be solved by splitting power companies into production companies and transmission companies. I believe that is Europe’s way. Alternately, regulation could be had to force transmission fees to match one’s actual transmission usage. Such an idea would need insurance fees to maintain redundancy. Regarding this discussion, I would avoid the competition between local versus transmission instead focusing on benefits of local while staying silent on transmission. Local reduces overall risk, lessens transmission losses with associated costs, and is more environmentally friendly.
In a minor third nit, Clean Coalition depicts a tree and root structure while discussing root causal analysis. Tracking such analyses is typically done with a “fish bone” structure. This is not an error per se as Clean Coalition had what resembles a fish bone turned from horizontal to vertical superimposed over their tree graphic. Hence should anyone try to counter the professionalism of their root analysis, we have a ready response.
With the cleanup out of the way, let’s look at what CAISO had to say.
“On August 14 and 15, 2020, the CAISO was forced to institute rotating electricity outages in California in the midst of a West-wide extreme heat wave. Following these emergency events, Governor Gavin Newsom requested the CAISO, CPUC [California Public Utilities Commission], and CEC [California Energy Commission] report on the root causes of the events leading to the August outages... The Final Root Cause Analysis confirms the preliminary report's findings that the three major factors leading to the August outages were related to extreme weather conditions, resource adequacy and planning processes, and market practices... ‘This Final Root Cause Analysis provides important insights and lessons learned about the factors that contributed to the rotating power outages of last summer,’ said CAISO President and CEO Elliot Mainzer. ‘As we prepare for summer 2021 and beyond, I look forward to working closely with the CPUC, CEC, policymakers and regional stakeholders to bring our planning, procurement and operational practices together into a modernized and well-integrated resource adequacy framework for California.’”
Resources were not the problem. Supply was adequate to customer demand if export contracts were not present. Yet the companies push the inadequate supply to meet demand narrative via “resource adequacy framework.” Extreme weather was not a problem; the system handled worse both on August 18th and in September.
Per CAISO’s root cause analysis,
“The Final Analysis confirms there was no single root cause of the August outages, but rather, finds that the three major causal factors contributing to the outages were related to extreme weather conditions, resource adequacy and planning processes, and market practices. Although this combination of factors led to an extraordinary situation, our responsibility and commitment going forward is to be better prepared for extreme climate change-induced weather events and other operational challenges facing our evolving power system.“
The situation was predictable and predicted, hence not extraordinary until that last piece, market practices, feeds into it. Yet the answer is “to be better prepared” meaning supply is viewed as the problem and increasing capacity as the solution. Note though not formally prioritized, by placing weather first and resource adequacy second, the authors create a fallacious primacy. Inflated demand gets discounted.
“On August 14 and 15, 2020, the California Independent System Operator Corporation (CAISO) was forced to institute rotating electricity outages in California in the midst of a West-wide extreme heat wave.” - Blame the weather as primary cause. This was the lead sentence of the executive summary.
CAISO’s cited three causal factors:
1. The climate change-induced extreme heat wave across the western United States resulted in demand for electricity exceeding existing electricity resource adequacy (RA) and planning targets.
2. In transitioning to a reliable, clean, and affordable resource mix, resource planning targets have not kept pace to ensure sufficient resources that can be relied upon to meet demand in the early evening hours. This made balancing demand and supply more challenging during the extreme heat wave.
3. Some practices in the day-ahead energy market exacerbated the supply challenges under highly stressed conditions.” - As we shall see, one and two are horse shit which only leaves number three.
Even with #3, they obfuscate:
“A subset of energy market practices contributed to the inability to obtain or prioritize energy to serve CAISO load in the day-ahead market that could have otherwise relieved the strained conditions on the CAISO grid on August 14 and 15. The practices which obscured the tight physical supply conditions included under-scheduling of demand in the day-ahead market by load serving entities or their scheduling coordinators, and convergence bidding, a form of financial energy trading used to converge day-ahead and real-time pricing. In addition, the CAISO implemented a market enhancement in prior years. In combination with real-time scheduling priority rules, this enhancement inadvertently caused the CAISO’s day-ahead Residual Unit Commitment process to fail to detect and respond to the obscuring effects of under- scheduling and convergence bidding during August’s stressed operating conditions. Although the CAISO is now actively developing solutions to these market design issues, most of the day-ahead supply challenges encountered were addressed in the real-time market as a result of additional cleared market imports, energy imbalance market transfers and other emergency purchases.” - The market practices more than contributed to an inability to obtain or prioritize energy to serve the CAISO load; they created the strained conditions.
CAISO tried to blame optimistic views of renewables as impactful while shifting focus to CPUC:
“Solar and wind – The CPUC has improved the methods for estimating the reliability megawatt (MW) value of solar and wind over the years, but the reliability value of intermittent resources is still over-estimated during the net peak hour. Improvements to the RA program should account for time-dependent capabilities of intermittent resources.”
Now let’s get to Clean Coalition’s review of events:
I am sharing many Clean Coalition slides though their intent is wide viewership, so I believe I’m in the spirit of fair use. They want visibility.
Note: Heat is used as proxy for demand as heat drives air conditioning to work harder while customers want more of it. More work load at harder effort per unit work.
- The August 14th & 15th heat wave was not exceptional.
- August 18th was hotter.
- Per CAISO’s own figure ES.1, previously depicted, September had the hottest day of the season.
- Others faced the same heat.
- Arizona, Nevada, Oregon all had no issues.
- The parts of California not in CAISO had no issues.
- Demand on the 14th & 15th was not excessive relative to predicted peak & to other days.
- Power plant forced outages rose with the heat of the day.
- Planned outages matched early AM hours.
- Energy prices spiked with “Emergency Requests.”
- August 14th & 15th exports were excessive particularly during the hot hours.
- Exports were blocked August 18th.
- No problems on the 18th.
- Neighboring states also had no problems.
- Exports weren’t keeping them afloat previously.
- Exports “dwarf” all other demand issues.
- ENRON comparison.
- Lessons learned.
- Lessons forgotten.
- Federal Energy Regulatory Commission (FERC) protections expired.
- Opaque market.