For the first time in nearly 20 years, California experienced rolling blackouts in August as record high temperatures placed unusual stress on the state’s electric power grid. The inconvenience to millions of Californians raised questions about the reliability of the grid as the state implements aggressive policies to reduce greenhouse gas emissions through greater reliance on solar and wind power and other cleaner energy solutions.
In this edition of Columbia Energy Exchange, host Bill Loveless reached out to Cheryl LaFleur, a former chairman of the Federal Energy Regulatory Commission and a distinguished visiting fellow at the Center on Global Energy Policy, for her take on the blackouts, which she wrote about in an op-ed in “State of the Planet,” an online blog at Columbia University’s Earth Institute.
They talk about what caused the blackouts during the weekend of August 14, when an extreme heat wave blanketed California and other western states, as well as how they compared to the last such occurrences during the California energy crisis of 2001.
In short, Cheryl says, the problem isn’t California’s solar and wind systems, which operated just as they were supposed to do, but rather the state’s failure to make sure there were other energy resources to meet peak demands for electricity – especially for air conditioning to cope with the heat – when the sun wasn’t shining and the wind wasn’t blowing. Adding to the difficulty is California’s preference to control its own power market rather than participate in a regional market, she says.
Bill and Cheryl discuss that as well as the political fall-out from the blackouts, with critics of the state’s climate policies claiming those measures risk the reliability of the California grid, while supporters of those policies saying they’re as necessary as ever to combat climate change.
Of course, with California and much of the rest of the Pacific Northwest suffering from a record spree of wildfires, there’s no avoiding talking about the magnitude of climate-related catastrophes occurring now and the extent to which they affect efforts to transition to cleaner, reliable forms of energy.
Cheryl was one of the longest-serving members of the Federal Energy Regulatory Commission, nominated by President Obama in 2010 and serving until 2019. She was the chairman from 2014-15 and acting chairman from 2013-14 and in 2017.
Earlier, she had more than 20 years of experience as a leader in the electric and natural gas industry, including serving as executive vice president and acting CEO of National Grid USA.
Bill Loveless: Hello and welcome to the Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Bill Loveless. For the first time in nearly 20 years, California experienced rolling blackouts in August, as record high temperatures placed unusual stress on the state's electric power grid. The inconvenience to millions of Californians raised questions about the reliability of the grid there, as the state implements aggressive policies to reduce greenhouse gas emissions through greater reliance on solar and wind power and other cleaner energy solutions.
To get some answers, I reached out to Cheryl LaFleur, a former Chairman of the Federal Energy Regulatory Commission, and a Distinguished Visiting Fellow at the Center on Global Energy Policy for her take on the blackouts, which she wrote about in an Op-Ed in State of the Planet, an online blog at Columbia University's Earth Institute. We talked about what caused the blackouts during the weekend of August 14, when an extreme heat wave blanketed California and other western states, as well as how they compared to the last such occurrences during the California Energy Crisis of 2001. In short, Cheryl says the problem isn't California’s solar and wind systems, which operated just as they were supposed to do, but rather the state's failure to make sure there were other energy resources to meet peak demands for electricity, especially for air conditioning to cope with the heat when the sun wasn't shining, and the wind wasn't blowing.
Adding to the difficulty is California's preference to control its own power market, rather than participate in a regional market she says. We discussed that as well as the political fallout from the blackouts with critics of the state's climate policies claiming those measures risk the reliability of the California grid. While supporters of those policies say they are as necessary as ever to combat climate change. Of course, with California and much of the rest of the Pacific Northwest, suffering from a record spree of wildfires, there’s no avoiding talking about the magnitude of climate-related catastrophes occurring now and the extent to which they affect efforts to transition to cleaner, reliable forms of energy. Well, here's our conversation. I hope you enjoy it. Cheryl LaFleur, welcome back to Columbia Energy Exchange.
Cheryl LaFleur: Thanks for having me.
Bill Loveless: Well, Cheryl, our conversation comes as California and much of the rest of the Pacific Northwest suffers through wildfires of historic proportions, just weeks after a severe heat wave with triple digit temperatures in some places prompted the first rolling blackouts in California since 2001, it's simply incredible.
Cheryl LaFleur: Yes, it's unbelievable what's going on out there, especially the tragic loss of life from the wildfires and they're still obviously not under control. I was just reading that 10% of the population of Oregon has been evacuated. But there's been a bit of an unfortunate tendency in the media as part of the tendency toward hot takes to conflate the wildfires with the rolling blackouts in mid August. And ironically, the rolling blackouts, while it’s much more complicated than that, were related to California's efforts to fight climate change, which are very much underway. But the wildfires are a direct result of climate change and really highlight the importance of the issue. And somehow to have the -- some elements of the media saying look at what a mess California is, first, this and then that is really not fair. And I think that the utilities are doing a very conscientious job as far as I could see to do the proactive turning off lines to avoid as much loss of life as they possibly can.
Bill Loveless: Well, let's talk about the recent blackouts which of course you wrote about in your Op-Ed in the Earth Institute’s State of the Planet. What happened?
Cheryl LaFleur: Well, what happened for anyone who's not familiar is that for a couple of days in mid August, the California Independent System Operator, the grid operator, intentionally turned off few hundred thousand people for an hour at a time when they did not have enough power, enough generation, enough resources to keep the lights on for everyone else, everyone at the same time in California, and that's a highly unusual event so it naturally attracted a lot of headlines. I think the causes are a little more complex. There was a lot of, as I said, in my Op-Ed, that the situation was like a Rorschach Test and people would look at it and see what they wanted. So people such as President Trump, who don't like wind and solar would say, Aha, this proves it doesn't work. But in fact, the large amount of solar electricity and wind electricity that California has performed as designed. One of the problems is that in the extreme heat when their load was at record levels, California did not in those hours have enough balancing resources to use when the sun sets as it does every day and when the wind dies down, and the other resources are not available. That's partly because they had closed a lot of the gas fired power plants, 5000 megawatts of them, but not yet in all cases, open the new resources that were intended to replace them largely battery storage, and other forms of resources. And that, in turn, if you dig a level deeper, is because there's a rather tangled and complicated responsibilities for having enough resources in California, divided among the California Energy Commission which does the forecast, the California Public Utilities Commission, which requires the electric companies and Community Choice Aggregators to sign up for resources, and the California ISO, which is the recipient of all those resources and have to keep the lights on, and I think that needs to be re-examined. The final factor I would point to is that California is not part of a larger market beyond the state and the situation could be ameliorated with more transition and more market sharing among other regions that have different time zones, different resource mixes, different weather patterns and at a time when everyone was short, including the Pacific Northwest, a lot of the imports that the California regulators thought they were relying on, did not come into the state.
Bill Loveless: Right. And of course, there was that heat wave that covered much of the West, particularly the southwest and simply meant that the resources that California could normally draw upon from outside the state were not available. Now, one thing I want to make sure people understand maybe, is, you know, there's comparisons here between what happened in August and rolling blackouts that occurred back in California in 2001. Is there any sort of comparison that needs to be made?
Cheryl LaFleur: Well, there were rolling blackouts in both instances, and they were both in California. So that's really where the similarity ends. What happened in 2000 through 2001, well, first of all, had nothing to do with changes in the resource mix and balancing resources, they had a very different resource mix. It was largely the result of a flawed market design that resulted in the loss of an ability to cover the load. There was documented market manipulation by Enron and several other companies that later -- which they later paid heavy penalties for. And it was also much larger in scale. I've been chastised by members of the Northwest delegation on the Hill for calling it the California Energy Crisis because it was really a Western Energy Crisis. And between one and 2 million customers lost power over various times during a whole year between I believe, June 2000 and May 2001. So it was really a very profound incident and series of incidents and also customers paid hundreds of millions of dollars extra that were later the series of many cases in the courts and at FERC for literally decades. So that was a much different incident, but because rolling blackouts are thankfully so uncommon that people naturally harked back and said, aha, California again, only 18 years later, 19 years later must be the same thing.
Bill Loveless: Right. You say in your Op-Ed, you blamed lack of accountability on the part of the California Independent System Operator and the State's Public Utility Commission for the problem. What do you mean by that?
Cheryl LaFleur: Well, there are really a couple different ways you can align your regulations to make sure you have enough resources to keep the lights on. In the states that are still have vertically integrated companies and heavy state regulation, which is most of the Midwest and the South, some of the Midwest, the South and the West other than California, the state regulators require the electric companies to buy resources in an amount the state regulators oversee or to build them themselves and they’re accountability to make sure there's enough to meet the forecast. In the eastern markets PJM, New York ISO, ISO New England, the market operators run capacity auctions to make sure there's enough resources to keep the lights on plus a reserve. California has a bit of a hybrid system where the resources are varied. The responsibilities are tangled and divided. And there have been battles documented between the PUC and the California ISO, the California ISO was concerned that the PUC wasn't lining up enough resources that the imports were not -- they didn't have enough of a legal right to call on the imports at all times. And that they were concerned that there would not be enough resources to keep the lights on and unfortunately, that came true on this occasion. I think it's something that the California Legislature needs to take a look at how their responsibilities are aligned. And there's probably a role for FERC as well.
Bill Loveless: Cheryl, there are options for compensating for solar and wind energy when the sun's not shining and the winds not blowing and of course, circumstances differ from one state to another and California has its own set of circumstances. I mean, the state did, has looked at this, the Public Utilities Commission there has ordered electricity providers to add 3300 megawatts of new power capacity, most of which is expected to be lithium ion batteries that can store solar power for use at night, but help us understand what are the options for California for balancing the load?
Cheryl LaFleur: Well, when you're using a considerable amount of renewable generation, you need fast ramping controllable resources to complement it. And among the options are gas-fired generation, which is used in many regions of the country to balance wind and solar, electric storage, like the 3300 megawatts you mentioned where that online that can very be very good for short term balancing, hydro whether pumped hydro or conventional hydro can be good for balancing and also demand response and moving load off peak and we haven't mentioned this, but in the week or two, after those rolling blackouts, California had several close calls, but the California ISO in the state of California worked carefully to call on conservation and demand resources and move industrial load off peak and did a very good job keeping the lights on and not having to use rolling blackouts again. Those are some of the most familiar of the balancing resources and in the case of California, because of their ambitious decarbonization goals, they have a preference for storage that can be charged with renewable power and then discharged when needed. And that would have been very useful had it all been built.
Bill Loveless: You mentioned demand response to me. And as I understand it, California does not have a very extensive or robust program for demand response where effectively you pay consumers to stay offline at certain times, or to use less electricity, I should say at certain times. And as you mentioned before, they're not part of a capacity market. I mean, how big of a concern is that for the state?
Cheryl LaFleur: Well, I mean, first of all, in the interest of full disclosure in 2018, I voted in a FERC case in which the California generators asked FERC to order a capacity market, the state of California and other stakeholders very much did not want it and FERC did not require it. It would be one way to solve the problem, but there may well be other ways. And I think we have a couple goals in conflict. California is very interested in doing more regional operation with the other western states and they definitely do not want to FERC-mandated capacity market because they mostly have vertically integrated companies. So in that case FERC -- California would probably want to stay away from that. On the other hand, it would be helpful it would be one way to ensure there were enough resources. There may be other ways and I think that that's something both the ISO and the state legislature and FERC had to take a hard look at.
Bill Loveless: You mentioned the FERC, I'm interested in the sort of history that FERC and the California system operator have had. FERC does oversee the California Independent Power System Operator. You mentioned the differences between the state and FERC over capacity markets, but is there some other way that FERC can help facilitate a solution to this situation you have in California?
Cheryl LaFleur: Well, I think FERC is likely to be involved in any tariff changes that the California ISO proposes, for example, greater use of reliability must run contracts, changes in the way imports are counted in their system and so forth. I mean, FERC does regulate the California ISO, that means FERC was heavily involved in approving the California market structures, the energy markets and the ancillary services markets that were constructed in the aftermath of the Western Power Crisis. And FERC has been heavily involved every step of the way, in the energy imbalance market that the California ISO has carried out the last few years, which has allowed the sharing of resources when one company has extra resources to share it across the west. That's an important start, but I think there's more that can be done to take advantage of the regionalization and FERC would have to be involved in that. Transmission is another part of the solution to make sure that there are ideally transmission between different time zones so you could take advantage of diversity of load and resources. And that FERC has authority for transmission planning and rates. So they'll definitely be part of the solution here.
Bill Loveless: You’re a former Chairman of the Commission, certainly former Member of the Commission for a number of years. I mean, is there anything that you any advice you would have for the Commission now in terms of what to do here to help California?
Cheryl LaFleur: Well, I've been hesitant to give advice, but something that I was always mindful of, and I thought it generally served us well was that FERC tried hard not to impose solutions on the west. The energy imbalance market came about because it organically grew in the West itself. There was quite a lot of resistance when FERC attempted to impose a market structure on the west at the time of standard market design some decades ago. So I always used to say I was sending positive vibes, and the West would figure out what it wanted. I think maybe a little more than positive vibes as needed now, I think FERC might have to be a bit more muscular. But I think they still need to work very closely with the California regulators who are right in the middle of this situation.
Bill Loveless: In what effect could they be muscular would it be in terms of the…?
Cheryl LaFleur: In terms of making more requirements for what resources the California ISO has to have available.
Bill Loveless: You know, as you mentioned, California has been aggressive in setting goals for carbon free energy, as have other states. How did California's efforts to assure reliability as it makes this transition compare with those of other states? Are there lessons here for other states?
Cheryl LaFleur: Well, there definitely are lessons for other states anytime something like this happens. It’s something the whole industry has to learn from. And I think the important lesson of keeping an eye on the balancing resources, as you decarbonize, most of the other states that have substantial renewable resources also still have a substantial fossil fleet. Nobody has yet cracked the code have really deep decarbonization, of how you're going to run a system entirely with either for your balancing resource, either storage or hydroelectricity, or the things that are still more or less on the drawing board like fossil generators with carbon capture and sequestration, or hydrogen balancing. Most of the studies that I've read have said that most regions of the country could get to 70 to 80% renewable penetration if they kept some fossil for the rest just to balance and that would be a substantial decarbonization from where most regions are now, but we haven't 100% cracked the code of an economic way to get that last 20 to 30%. But while we're decarbonizing the first 70 to 80% hopefully, we'll figure that out.
Bill Loveless: And you look at Texas too. Texas has had some brutal weather this summer and in recent summers, and yet, there hasn't been the sort of difficulties we've seen in California.
Cheryl LaFleur: Well, Texas has very tight reserve margins. And they whistle by the graveyard, the last few summers. And they have had a very strong system of demand response. They certainly have fossil fuel available. That's where most of it comes from when they need to balance. And I think they've done a good job holding things together because Texas puts a lot of responsibility on the demand side of the market to make contracts for resources to be available and holds them to the risks that they take. So I'm not saying that California should change it’s system to Texas, Texas does have some advantages in its location. California does not have indigenous natural gas to the level that Texas does.
Bill Loveless: You mentioned in your Op-Ed, Diablo Canyon, the nuclear power plant in California that's slated to go offline in the not too distant future. Do you think that's a mistake for the state’s -- for reliability of the state's grid?
Cheryl LaFleur: Well, I think we have to take a hard look at all of the nuclear units that are closing because they're carbon free energy, a large amount of it. And if they can safely be retained, you're giving up a lot of carbon free energy when you let them go. I did a little bit of just googling around and it looks like Diablo Canyon is at a stage right now with the NRC and its closure that it would be very difficult to just say, Okay, now we're going to revive it. I believe it might have passed the point of no return and that California was unambiguous in not wanting it. But yeah, those were a lot of carbon free megawatts when you close a nuke.
Bill Loveless: You also wrote in your piece that when something goes wrong, you said it's easy to make snap judgments, demonize technologies you don't like, or suspect foul play, and you want such false diagnoses about what ails California's power system only encourage snake oil solutions. What do you mean by snake oil solutions?
Cheryl LaFleur: I meant people saying -- Well, first of all, there was the people saying, the big problem is California is being too aggressive on renewables, California should back off renewables. First of all, that's not going to happen. But also, I don't believe a close analysis of the situation suggest that it has to happen. I think California has to continue to fight hard on climate change. Look at the wildfires look at what it's going through. The second thing is people immediately started looking under every rock for market manipulation, because it's easy to have a demon, that makes it easier to blame someone, and I think we have to be careful making those allegations once they're real. I've seen no reliable evidence, that's the case. And the other thing is I saw a flurry of tweets of people saying if only California would fill in your technology that somebody is selling, this would solve the problem. There's no magic solution. Things like figuring out how to reshape your resource adequacy structure. That's hard, boring, politically complicated work. How to regionalize and bill more transmission, that's difficult. That's not something that can be done in a day. But sometimes those harder solutions are the real ones.
Bill Loveless: You know, I find it hard to believe, though, that there hadn't been more thought given to some of these more difficult challenges that you just mentioned, you know, whether it's transmission or some of these other things.
Cheryl LaFleur: Well, they certainly have thought about it, but they never actually ran out of electricity before so they were holding it together. There's no question that the California ISO has been on a path for several years toward looking for more regional operation. Part of the problem is that the California ISO is very much controlled by the State of California. The Governor picks the members of the board and it has a responsibility to the state as a state entity. And for several years in a row going back to when Governor Brown was governor, the California Legislature looked at legislation it seemed like every session to change the governance rules of California ISO to allow other states to participate, to allow more West wide sharing of resources. But they never actually got that legislation over the finish line. The other states in the West don't want to become part of the California ISO if it's controlled by California and only meets California's needs. I think that legislation would be well worth reexamining, because the United States is blessed with a very vast geography, four different time zones, lots of different resources, the sun doesn't set the same place everywhere at once, and you could get quite a lot of benefit from more sharing.
Bill Loveless: It seems to raise that old concern over just the nature of the grid in the United States. We have in effect, the number of grids that don't necessarily work together when there's need for that.
Cheryl LaFleur: Yes. Well, I did an interview with BBC this morning, which is my second most important interview of the day after Bill Loveless, and they were very interested in the Seam Study that came out of the Department of Energy or didn't come out to the Department of Energy on connecting the interconnections. But I kept trying to explain that even if you didn't connect the interconnections, though that might be a grand idea, there's so much potential for more transmission within the interconnections. The Eastern and the Western interconnection are vast. The Western interconnection has 11 full states plus part of Texas, a little bit of Mexico, and goes all the way up into Canada. So there's quite a lot of room for more connection.
Bill Loveless: But as you know, making those connections is difficult, often politically and regionally. The Congress tried what back in 2005, 2007 to offer steps at the DOE, the Department of Energy and the FERC could take to help force through transmission, the state's challenge that nothing ever really came of that and we still see the difficulties of building transmission across state lines.
Cheryl LaFleur: Well, there's two different, at least two different big problems. The first, which you just referred to Bill, is siting. With so much state and local control over siting, there's so many people that have to say yes or that have veto power over a big transmission line. And I've testified several times that if Congress could revitalize the backstop transmission siting in section 216 of the Federal Power Act that would help get transmission for decarbonization built. Secondly, the states have to agree on cost allocation and because we don't have any federal carbon goals, climate change is being addressed state by state and there are some pretty considerable differences between the political goals of the different states when it comes to climate change. So agreeing to cross a state to help a state that has more aggressive climate goals can be politically difficult. I think there'll be an opportunity if there's a new administration to look at doing more at the federal level to help, but I don't want to be a Pollyanna. I think the battle lines will be drawn in a different place. It's not like everything will immediately be changed.
Bill Loveless: You know, as a member of the FERC, you are careful to avoid putting yourself in a position where politics could influence any of your decisions there. But nevertheless, we look at this situation today and see that the potential for political fallout from the blackouts. You mentioned some of the remarks by the President, I recall, he tweeted that the “Bernie Biden, AOC Green New Deal Plan would take California's failed policies to every American,” the Wall Street Journal's conservative editorial page called the brief blackouts, “warning to the rest of America” about the risks of Green New Deal policies. I mean, do you worry about the fallout, the political fallout.
Cheryl LaFleur: Well, as you know, there's just so much political polarization. I mean, more than two thirds of Americans want more action on climate change, but those that don't feel so very strongly. And there's a tendency to polarize everything to the extreme. President Trump has demonized particularly wind power, which he loathes. And so it's either if you have wind and solar, the lights will go out, haven't you heard him say you won't be able to watch TV if you have renewable energy, whereas there are people on the other end of the spectrum that would never want to use one molecule of a fossil fuel ever again. And in fact, as I said, I think we can achieve very considerable decarbonization, while still using some fossil fuels to balance for some period of time and we'd be far better off than we are now. We don't have to be driven to one end of the spectrum or the other. And the conclusion that renewables don't work is not a fair one from what happened in California. They worked exactly as they're designed to work. It was the other things that were not there when they were needed, because of design issues, market design issues.
Bill Loveless: Well, we started our conversation by talking about just the, you know, devastating fires taken place that sight of the orange skies above the Bay Area was just was a scary, was apocalyptic. But, you know, we are in an era of multiple overlapping, competing disasters with climate change, visible, tangible and real to people in a way that it hasn't been before. So the risks are increasing to the grid. You know, how do we not get overwhelmed by the scale of this task? You know, when the world it seems is literally on fire?
Cheryl LaFleur: Well, first of all, we just have to start it and stay at it steadily. I think many have pointed to the difficulties of various elements of decarbonization, and there are difficulties, but not doing anything has a tremendous cost as well and look at what's going on right now with the wildfires as well as the hurricanes and the floods. And there's quite a lot of emphasis right now also on energy equity. The poorest of people in the middle of a pandemic, are the ones who don't have their own home generators or solar rooftops and so forth, and the least able to withstand wildfire whipping through you know, with perhaps no place to go. So there are multiple overlapping disasters here and I think the need to address the changes to our weather and the changes to our climate are too acute to not start or not continue.
Bill Loveless: And you mentioned before the challenges that utilities face. I'm recalling one of our colleagues at the Center on Global Energy, Policy John McWilliams, Former Official of the Department of Energy, Risk Official there, the Department of Energy testified before Congress back in January, where he noted that, you know, PG&E, Pacific Gas and Electric, has been called the first climate change bankruptcy that we've seen in the United States and John said that, you know, California wildfires, the ones that had occurred previous to these now, and the resulting bankruptcy of this utility are important as a case study for how we will manage these complex issues going forward and appropriately allocate the inevitable enormous and increasing costs of climate change threats and damage to our nation's critical infrastructure and among the various players, stakeholders, ratepayers, investors, etc. I think he's right. And I think that, but boy it's complicated.
Cheryl LaFleur: Well that's a fair comment and I think the question is when wildfires happen, who's going to pay for the damages and under the California Inverse Condemnation Laws, that burden was rather exclusively placed on the electric companies who don't have endless sources of funds other than their customers. And I think under the settlement that PG&E reached in the bankruptcy, some of that went to the Public Treasury, but it's an enormous sum that these wildfires are causing. By far the better solution is to try to mitigate climate change to prevent more wildfires in the future, rather than fight about who's going to pay for the ones we already have although we do have to decide that. And that gets back to the importance of the things California is working on, more renewables, more storage, electrification of transportation, and other measures to try to reduce the climate burden of energy. But needless to say, it's not a global climate change isn't something that even a state as large as California can solve. We need a global solution.
Bill Loveless: And I guess we can hope that all of these events, which are simply overwhelming, especially for states, their officials, regulators, their utilities to handle don't make it simply distract them to the extent that solutions are that much farther out into the future. Well, events are taking place at such a fast pace that it’s difficult to make sense of them, it seems but Cheryl, you're certainly helping us sort things out. Thanks for joining us again on Columbia Energy Exchange.
Cheryl LaFleur: Well, thank you for the opportunity and look forward to talking to you again.
Bill Loveless: For more on Columbia Energy Exchange and the Center on Global Energy Policy, go to our webpage at energypolicy.columbia.edu. or find us on social media @ColumbiaUEnergy and if you can take a minute to give us a rating on your favorite podcast platform. It helps us continue to grow. For Columbia Energy Exchange, I'm Bill Loveless. We’ll be back again next week with another conversation.