California's Resource Adequacy Mechanism
10 November 2005
By Amparo Nieto
At NERA's Marginal Cost Working Group Fall Conference on 10 November 2005, NERA Senior Consultant Amparo Nieto, based in Los Angeles, presented the new "California's Resource Adequacy Mechanism" to members of the group, comprised of energy professionals from electric and gas utilities across the US.
In her presentation, Ms. Nieto highlighted the existing resource adequacy concerns in California, namely the limited generation capacity entry and the existing transmission constraints in certain areas of the system operated by the California Independent System Operator (CAISO). Ms. Nieto explained the key design elements of the Resource Adequacy (RA) plan recently adopted by the California Public Utilities Commission (CPUC). The plan includes transitional steps, such as phasing out the existing liquidated-damages contracts and support to new wind technologies as qualifying RA capacity.
One of the main CAISO concerns is the existing "load pockets" in California. The RA plan affirms the need for localized capacity requirements, including the possibility of local capacity markets, but defers its implementation until further consideration. The ultimate goal is to introduce incentives for generation entry in areas where it is most needed, and to reduce CAISO's reliance on "Reliability Must Run" contracts with units in congested areas. Ms Nieto explained the further work needed and the design aspects that will need to be addressed regarding the imposition of local capacity obligations on LSEs.
To learn more about the new California Resource Adequacy plan please contact Ms. Nieto by using the link below. For information about NERA's Marginal Cost Working Group, please visit the link located in the right-hand column of this page.
