J.Pollock Blog

Outlook 2022: Solar, battery storage spark CAISO capacity surge EXCLUSIVE

Wednesday, April 13, 2022 9:29 AM CT
By  Garrett Hering
Market Intelligence

California’s efforts to ensure the lights stay on in the world’s fifth-largest economy this summer will depend largely on its fast-emerging lithium-ion battery stations and its aging fleet of natural gas-fired power plants.

If current project plans tracked by S&P Global Market Intelligence pan out, the California ISO could see an additional 9,172 MW of net nameplate capacity in 2022, largely lithium-ion batteries and solar photovoltaics frequently installed together, augmented by additional wind, geothermal and biomass resources.

That would far exceed the 2,436 MW of net capacity added in 2021, when California relied on new battery storage facilities to help ride through several capacity crunches, and the 3,379 MW added in 2020, when the Golden State experienced consecutive days of rolling blackouts amid a regionwide heatwave.

The grid operator expects a large portion of this year’s new resources to arrive when the state needs it most.

“We anticipate about 4,000 MW of new resources on the system this summer, which is our most difficult time of year to meet load, approximately half of which is storage,” CAISO spokesperson Vonette Fontaine said in an email.

Solar, storage surge

Developers intend to add some 2,524 MW of new CAISO-connected battery power capacity in 2022, roughly doubling total installed battery power capacity in 2021, according to Market Intelligence data. In addition, more than 6,300 MW of solar is planned to come online, as well as 320 MW of wind energy and 60 MW of geothermal.

Among the major projects anticipated online this year are Pacific Gas and Electric Co.‘s 182.5-MW/730-MWh Elkhorn energy storage project in Moss Landing, Calif., which was previously scheduled to enter operations in 2021. The project is sited next to Vistra Corp.‘s planned up to 1,500-MW Moss Landing Energy Storage Facility, where 400 MW/1,600 MWh already is built but remains offline following separate incidents in February and in September 2021.Portions of Clearway Energy Group LLC‘s giant Daggett solar-plus-storage complex in San Bernardino County, Calif., and Terra-Gen LLC‘s massive multiphase Edwards-Sanborn solar and battery storage project in Kern County, Calif., are also planned to enter operations in 2022.

Developer Ormat Technologies Inc. this year is building two new 30-MW geothermal energy projects for utilities and government-run community choice aggregators in California, including the Mammoth Phase IIB (CD4) Plant (Casa Diablo IV) in Mono County, Calif., and the North Valley Geothermal Project (Black Warrior) in Washoe County, Nev.The only major planned retirement on the CAISO system in 2022 is Vistra’s Oakland jet fuel-fired peaker, once a 165-MW facility with currently 110 MW of capacity that will be partially replaced with battery storage.

‘Fine line to walk’

No new natural gas plants are planned to start up in California in 2022 as procurement shifts almost exclusively to zero-emission resources. No retirements of gas-fired facilities are expected, either, after state energy regulators in 2020 and 2021 extended several aging plants through 2023 to provide a backstop when the state runs thin on resources during high-demand periods.”

Energy providers in CAISO have a fine line to walk over the next few years in order to keep up with both resource adequacy requirements and California’s near-term renewable and clean energy mandates,” said Adam Wilson, renewable energy analyst at S&P Global Commodity Insights.

This year’s anticipated capacity surge comes as the state prepares for the retirement of the 2,240-MW Diablo Canyon nuclear station, owned by PG&E, in two phases in 2024 and 2025. To ensure grid reliability as Diablo and aging gas plants are retired, the California Public Utilities Commission in June 2021 ordered utilities and other load-serving entities to procure at least 11,500 MW of clean energy resources between 2023 and 2026.Given the variable nature of wind and solar resources, and the primary focus on short-duration batteries with up to four hours of energy storage, “substantial overbuild of these resources is required to maintain grid reliability,” Wilson said.

Wholesale power prices this year in the CAISO market are expected to peak in August in both the northern and southern parts of the state, with forward prices reaching $90.11/MWh in the NP-15 zone and $96.79/MWh in the SP-15 zone. That is twice to three times as high as in April, when California in recent years has had significant midday oversupplies of solar energy.

Forward natural gas prices are expected to peak in December at $5.38/MMBtu at the PG&E Gate and $6.79/MMBtu at the SoCal Citygate.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.

Susan Dlin and Ciaralou Palicpic contributed to this article.

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