California ISO gets 79 bids totaling 4,474 Mw

The California Independent System Operator's call for generation earlier this month to avert blackouts next summer prompted bids from 79 generators totaling 4,474 Mw of power. The grid operator has projected the state is facing a short of 5,000 Mw without additional generating capacity. The bids ranged from a cost of $41-479/kw and included technologies that ranged from combustion turbines to reciprocating engines and one steam turbine.


Ann de Rouffignac
OGJ Online

The California Independent System Operator's call for generation earlier this month to avert blackouts next summer prompted bids from 79 generators totaling 4,474 Mw of power. The grid operator has projected the state is facing a short of 5,000 Mw without additional generating capacity.

The bids ranged from a cost of $41-479/kw and included technologies that range from combustion turbines to reciprocating engines and one steam turbine. The California ISO management evaluated the 79 responses in documents presented at a board meeting this week.

Management concluded that a reasonable portfolio of projects for 2,045 Mw could be selected yielding an average bid price of $125/kw. If all 79 responses were accepted, the ISO said, reliability would improve dramatically, but the cost would be �extraordinary,� as much as $1.5 billion over 3 years.

Proposals for 2,360 Mw were earmarked for Pacific Gas & Electric Co.'s service territory. Only 285 new megawatts were proposed for San Diego Gas & Electric Co. Gas supplies to new projects within San Diego Gas & Electric Co.�s service territory could be tight next summer, according to documents. The ISO said there are "constraints" on the SDG&E's gas transmission system.

The ISO calculated an average fair cost of $125/kw using a hypothetical 48Mw combustion turbine. Using the $125/kw benchmark cost, the ISO screened all the proposals and narrowed them down to 27 projects for 1,066 Mw which could get built without significant development hurdles.

Seven of those projects had a cost of less than or close to the benchmark $125/kw and 20 projects had costs above that figure, according to the ISO. Bidders blamed the higher costs on market risk, fuel prices, and emissions costs, and said high-risk, short-term projects require a higher rate of return.

ISO management recommended projects be pursued in order of least cost to more expensive and from least development problems to the more complicated until 2,000 Mw is approved with an average portfolio cost of $125/kw. The ISO also discouraged use of diesel-fired reciprocating engines. The ISO cited an opinion from the California Air Resources Board, which said �permits for mobile units are not intended to cover the use of such generators as stationary sources of power or emissions.�

The ISO's action is unusual.

�We never anticipated the ISO would take on the responsibility of stimulating development of generation resources this directly,� said Terry Winter, CEO of the California ISO. �However, if we do not assume this role, we will be increasingly challenged in our efforts to protect consumers from suffering rotating blackouts next summer.�

The ISO will have the right to call on the power for up to 500 hours each summer season (June 1-Oct. 31) in exchange for a capacity payment over a 5-year period. The ISO board authorized payment of up to $255 million/year. The cost of the power will be passed through to utilities who buy the power, according to Patrick Dorinson, ISO spokesman.

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