Trader Dov Quint sat in his basement outside Boulder, Colorado, scouring the state’s day-ahead power market for opportunities to profit from California’s heat wave. He saw something strange: Prices for electricity to be delivered the next day — the day of the blackouts — were nearing $1,000 a megawatt-hour, more than 26 times higher than last year’s average.
The last time that happened, in July 2018, the forecast for demand had been much higher. Something was amiss — were energy supplies lower than usual?
In Folsom, California, system operators for the state’s vast electrical grid were looking at the same numbers — and forecasting a significant power shortfall starting at 6 p.m. on Friday, Aug. 14.
They had a full day to act. And yet, when Friday evening rolled around, nearly 2 million Californians were plunged into darkness in the first rolling blackouts to hit the state since the energy crisis 20 years ago. Without warning, utilities cut power to blocks of communities in a bid to save the state’s electric grid from cascading power failures amid the worst heat wave in generations.
There’s plenty of blame to go around, from the state’s grid operator who failed to prevent the crisis in spite of market signals presaging it, to regulators who for years ignored pleas from power generators to line up more emergency resources, to a human-led climate crisis that’s producing extreme, unpredictable weather. Breakdowns across the board resulted in a power emergency that could have implications for how the state manages electricity from here on out.
On that Friday morning, grid operators weren’t panicking — yet. While the heat was certainly driving up demand, they had seen far worse days, such as in July 2006 when demand hit an all-time high of 50.3 gigawatts during a deadly heat wave.
The California Independent System Operator, which runs most of the state’s grid, asked neighboring utilities if they had any extra power to spare, John Phipps, director of real-time operations at the ISO, said at a public meeting the following Monday. But there was none. If utilities had any extra supplies, they were keeping them to themselves in case they needed the power as the heat intensified. So the ISO sent out an alert asking residents to conserve.
108 DEGREES
But as temperatures rose, peaking at 108 degrees Fahrenheit in Sacramento, California, demand climbed and supply looked more and more inadequate.
Gas users began pulling fuel from the Aliso Canyon storage facility, operated by Sempra Energy’s SoCalGas utility and which supplies gas-fired power generators. That was an unusual move for the time of year, according to traders, but the supplies likely cushioned the shock to power prices in Southern California.
At 2:56 p.m., a gas-fired plant unexpectedly tripped, sucking 475 megawatts of power from the grid. The state ordered power suppliers to fire up reserve gas units to make up the difference, Phipps said.
But there wasn’t enough reserve gas generation to go around. The state, guided by one of the most ambitious climate policies in the U.S., had retired 9 gigawatts of gas capacity — enough to power 6.8 million homes — over the past five years. The state is also looking to shut down Aliso Canyon, which has been operating at reduced capacity after the biggest gas leak in U.S. history was discovered there in 2015.
The ISO had been warning state regulators for years that there weren’t enough power supplies during the net peak period in summer and that it faced a potential shortfall of 4.7 gigawatts in the evening hours starting in 2020, said Steve Berberich, head of the grid operator. While the California Public Utilities Commission, which is responsible for making sure the state’s big investor-owned utilities buy enough power, has approved 3.3 gigawatts of new capacity, that won’t come online until 2021.
The commission pushed back on Berberich’s comments, saying utilities and other power distributors had procured the resources that were required to meet the demand forecasts on Friday and Saturday, according to spokeswoman Terrie Prosper.
“This is a shared responsibility, and we are working with our sister agencies to better understand why this occurred,” she said.
SOLAR SETS
By the late afternoon Friday, when the state’s substantial solar production began to drop off as the sun set, California ISO grid operators in its control room in Folsom knew they were in trouble.
The renewable supply was falling, and there wasn’t enough gas to replace it. The only recourse left was to import power from neighboring states. Unfortunately, imports on a major transmission line connecting Northern California to resources in the Pacific Northwest had been curtailed as grid operators across the region lined up supplies due to the extreme heat, according to Wood Mackenzie analyst John McMahon and the ISO.
Another problem emerged, too: In order to import power through the Energy Imbalance Market, which schedules deliveries across regions in real-time, California had to pass what’s called a flexible ramping sufficiency test — a way of proving that it isn’t overly dependent on imports to meet demand.
The ISO failed the ramping test at 15-minute intervals from 5:30 p.m. to 7 p.m., according to data reviewed by Bloomberg. That reduced imports by about 446 megawatts during the peak demand hour.
The grid operator had warned about imports before, saying in June that the state could be vulnerable to blackouts if there was a regional heat wave that limited supplies from neighboring states.
“We have told regulators over and over again that imports were drying up and more imports should be contracted for,” Berberich said. “That was rebuffed.”
The commission made changes to the way it’s forecasting imported energy that will go into effect in 2021, said Prosper.
ROLLING BLACKOUTS
Power prices surged, making that Friday the most profitable day ever to sell electricity from a gas-fired plant to the grid — until the following Monday, when prices rose even more, according to McMahon.
With no more resources to tap, the shift manager in Folsom declared a Level 3 emergency at 6:36 p.m. — which meant the state needed to use rolling blackouts to keep the whole grid from crashing. It was the first time California had to use such an extreme measure since the energy crisis of 2000 and 2001, when hundreds of thousands of homes and businesses went dark, power prices surged to a record and the state’s largest utility was forced into bankruptcy.
Utilities Pacific Gas & Electric Co., Southern California Edison Co. and San Diego Gas & Electric Co. cut power within minutes, using software that rotated outages in blocks throughout their service territories. They had little time to warn customers what was coming.
In Santa Clarita, California, the ventilation system at the Salt Creek Grille tripped and the eatery quickly filled with smoke, killing 70% of that night’s business. Forty miles away, 82-year-old Bob Proulx and his wife found themselves trapped in a more than 90-degree house when their air conditioner unexpectedly shut off and the garage door wouldn’t open. Further south, Yasmine Hairat looked up from her laptop to find every light in her neighborhood had gone dark.
“We had no notice,” said Jennifer Chadwick, director of sales and marketing for the Salt Creek Grille. “We looked at each other and said, ‘Oh my God another thing. Can anything else happen?’”
The lights were only out for a few hours, but the blackouts weren’t over yet — and they added to a long list of miseries for Californians already grappling with the most coronavirus cases in the country, the worst unemployment rate in the West, and rampant wildfires displacing tens of thousands of people.
ROUND TWO
On Saturday, it happened all over again.
Grid operators began the day confident they could avoid another round of outages. Demand was lower than the day before, and supplies appeared sufficient. But shortly after 5 p.m., a 1-gigawatt wind farm suddenly went down. An hour later, a natural gas unit shut. Nearly 1 million people lost power.
Over the next few days, as the heat wave persisted, the risk of more blackouts loomed large. At one point, the ISO warned it might have to shed 4.4 gigawatts, blacking out as many as 10 million people. But by then, big electricity users had started cutting back their energy use in respond to personal pleas from people in Gov. Gavin Newsom’s office. It was enough to put an end to the outages, for now.
In a letter sent to Newsom late Wednesday, the heads of the agencies that oversee the state’s electricity system said they would investigate what went wrong. One question repeatedly comes up. Why did this happen when California has seen much hotter days, and much higher demand? Put simply, experts say, it was a problem years in the making — from killing gas plants without replacing them to designing a market that’s more focused on thwarting manipulation than incentivizing back-up generation.
Regulators, grid operators, utilities and industry experts all saw this moment coming. They just didn’t think it would get here so fast.
“I thought this was going to be a 2021, 2022, 2023 problem,” said Quint, who formerly worked as a senior market engineering specialist at the ISO. From here, “the ramp is only going to get steeper and it’s not going to go away.”
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