Dive Brief:

• The California Independent System Operator (CAISO) is urging state regulators to consider possible increases in intra-day and seasonal electric sector gas usage as the state strategizes a longer-term transition away from the fuel.

• CAISO currently relies predominantly on natural gas and imported capacity to handle ramping, flexibility and the integration of renewables, the system operator said in comments filed with the California Public Utilities Commission (CPUC) last week.

• The CPUC in January launched a rulemaking to, among other things, manage the move away from natural gas-fueled technologies. California is aiming to derive all electric retail sales from renewable and zero-carbon resources by 2045.

Dive Insight:

The CPUC's rulemaking focuses on ensuring the safety and reliability of the natural gas system as the state moves toward its carbon goals, Commissioner Liane Randolph said while approving the order-instituting rulemaking (OIR) last month. In the first track, the agency will review reliability standards as well as rules governing long-term contracting and tariff changes. The agency will also consider the possibility of stranded assets and cost shifts among ratepayers that could accompany the transition. 

The CPUC's OIR "rightly" noted that decarbonization policies will reduce gas usage over time — but ramping and renewables integration could actually increase intra-day and seasonal usage in the interim, CAISO said in its comments. The system operator wants regulators to consider hourly gas withdrawal needs of the generation fleet, and the consequences for the natural gas delivery system, as part of the rulemaking.

CAISO's analysis suggests that the maximum three-hour net load ramp could increase from 15,639 MW to around 25,000 MW by 2030, largely due to solar generation. These ramping needs should be considered under a long-term strategy, since "lower overall gas usage may not translate into a commensurate reduction in gas needs during ramping periods," the system operator said, and the CPUC should also review whether decarbonization and renewables policies in other western states could impact electric generation gas demand.

According to the system operator, multiple days of cloudy coverage could also reduce solar and battery storage capability. During the week of Jan. 13, for instance, peak solar output fluctuated between 16% to 71% of installed capacity.

"The Commission should strategically retain the existing gas generation fleet and a sufficient gas transportation system until the electricity sector can reliably transition away from such resources," according to CAISO.

Regulators should not look at the gas system as a "hindrance" to California's climate goals, but rather an asset that could be used to transport fuels and gases —​ like hydrogen —​ in the future, Southern California Gas Company (SoCalGas) and San Diego Gas & Electric (SDG&E) said in joint comments. The system could also be used for carbon capture and sequestration, the utilities contended, and gas will play an important role in the near-term, both in terms of reliability and helping to integrate renewables.

The two Sempra Energy subsidiaries also told regulators that the natural gas system could help power communities that are affected by public safety power shut-offs.

"The Commission should consider pathways to attain the State's climate goals with a dynamic approach that is not locked into a single, predetermined outcome," and long-term planning should be flexible and adopt a "least-regrets" approach, according to the utilities. 

California will likely need a gas system in the long-term, the Environmental Defense Fund (EDF) said in comments, and the state's transition should aim for "a new, to-be-established target" rather than zero gas. As part of that shift, the CPUC should look at reallocating costs so that customers that still depend on the gas system don't face unreasonable rates —​ especially since "there are several financial and technical constraints that may require a customer to remain on the gas system," according to EDF. 

Sierra Club and the Natural Resources Defense Council in joint comments recommended that the CPUC require gas utilities to conduct a detailed mapping and assessment of the gas distribution system, to better prepare for long-term planning. The commission should conduct a workshop within the next three months to pinpoint data categories that are required, the parties said.

The environmental groups also pushed back against the commission's proposal to consider natural gas demand scenarios based on current state and local greenhouse gas emissions laws. Given how quickly California's Renewables Portfolio Standard goals have changed, current laws may not paint an accurate picture of future demand, they said, asking the commission to instead look at natural gas reductions that would be needed to meet the state's decarbonization objectives, rather than early targets in existing laws.

"Reliance on laws in existence today will understate the extent of future gas declines, leaving California ill-prepared to effectively manage the transition from the gas system," they said.