The California power grid wants to make sure it can keep electricity flowing as residents rely on a greater amount of wind and solar power and strict water rules force the shutdown of power plants along the coast in the next few years, the agency said.
California has the most ambitious plan of any state to expand use of renewable resources to 33 percent by 2030, by boosting wind and solar generation.
California is also ahead of other states in efforts to dramatically reduce the amount of ocean-water used for cooling at existing natural gas-fired power plants built along the coast.
"As the level of intermittent resources typically used to meet Renewable Portfolio Standard requirements continues to increase, so does the need for flexible capacity resources," the California Independent System Operator (ISO) said in a white paper issued late last week.
To avoid electric disruption and potential blackouts given changes in the state's power-plant fleet, more generation will be needed that can start on very short notice and increase output quickly, the ISO said.
But that type of flexible generation is finding it harder to remain profitable under current market rules and low natural gas prices, the grid agency said.
The ISO paper outlines several resource issues ahead of a stakeholder meeting set for February 6. Industry comments are sought by February 16.
Among the challenges of integrating a 33 percent renewable mandate "is ensuring that the ISO has sufficient flexible capacity to address the added variability and unpredictability created by intermittent resources," the agency said.
"This challenge is magnified even further with the prospect of losing over 12,000 megawatts of flexible capacity resources to once-through-cooling mandates established by the State Water Resources Control Board," the report added.
The ISO requested a waiver last week at the U.S. Federal Energy Regulatory Commission (FERC) to be able to compensate Calpine Corp to keep a 500-megawatt natural gas-fired plant operating even as weak power prices have made the 10-year old plant uneconomical, according to its owner.
"The ISO must ensure that it has a robust backstop procurement authority to resolve capacity deficiencies, when and where needed," the agency said in the white paper.
Initially, the ISO will work on tariff changes to address the loss of power plants, such as Calpine's Sutter plant, that it believes will be needed in the next five years as the state's generating fleet adapts to the new mandates. It also wants authority to buy flexible back-up power when the companies that serve load fall short.
The ISO established a "phase 1" schedule to seek market comment on rules and cost allocation, draft proposed rules and seek board approval to meet a late July deadline to file tariff changes at FERC.
In phase 2, the ISO said it will address further modifications as needed by the end of 2013.
Current resource planning programs in California look at power needs for the next year and for a 10-year planning horizon, but neither program addresses capacity needs in years two through nine, the ISO said.
(Reporting by Eileen O'Grady in Houston; Editing by David Gregorio)