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Management in Practice

California’s Path to a Carbon-Neutral Grid

Elliot Mainzer ’98 became president and CEO of the California Independent System Operator (CAISO) on October 1, 2020, six weeks after devastating rolling blackouts hit the state during an August heat wave. He explains how California’s grid is preparing for another hot summer while fighting climate change by undertaking a massive transition to carbon-neutral power.

A power substation at the LS Power Group Gateway Energy Storage project in Otay Mesa, California.

A power substation at the LS Power Group Gateway Energy Storage project in Otay Mesa, California. Photo: Bing Guan/Bloomberg via Getty Images.

Q: What does the California Independent System Operator (CAISO) do?

CAISO operates the high-voltage transmission system and the energy market for about 80% of California and a small portion of Nevada. We’re the entity that matches the real-time supply of electricity with demand and is responsible for efficiently integrating the next generation of clean energy resources into the grid.

In addition to our fundamental responsibility as a primarily single-state independent system operator, increasingly we’re taking on broader functions across the western United States. Those include monitoring reliability and operating an energy imbalance market that lets us buy and sell energy with the Northwest, the Intermountain West, and the desert Southwest.

Finally, we’re active globally through two organizations. GO 15 is an association of the largest grid operators around the world. We share advice and talk through key issues including how we’re taking on climate change. And CAISO along with several other system operators that have high renewable energy penetration developed a new initiative called the Global Power Systems Transformation Consortium to advance technology and share learnings from the leading edge of decarbonization efforts.

Q: In August 2020, California suffered rolling blackouts during a heat wave. In February 2021, Texas experienced rolling blackouts during a polar vortex. What’s going on?

“In California last August, the loads were outside of the planning horizon that the energy planners used. We’re seeing the impacts of a changing climate. The past is no longer a great predictor of the future.”

We’re seeing the impacts of a changing climate. The past is no longer a great predictor of the future. In California last August, the loads were outside of the planning horizon that the energy planners used. Widespread heating and cooling events stretch the grid’s physical infrastructure to its absolute limit. Extremes are likely to become more common in the years ahead, and we need to plan our infrastructure and our operations to be ready for it. Texas is going to have to harden their resources for cold; we need to be better prepared for extreme heat. Our future power systems must be both reliable and resilient to the new uncertainties associated with climate change.

Q: What lessons did CAISO take away from last summer?

Working closely with the California Public Utilities Commission and the California Energy Commission, we identified three underlying causes. The first is that the heat event was in some ways unprecedented. We had record-breaking temperatures in Southern California, but it was super hot across the western United States. California imports about 25% of its power from adjacent states. The heat increased demand throughout the region, which meant the total amount of power available to import was less than what the state would typically depend upon in the summer.

The second factor was that California hadn’t planned for enough capacity to be available in the net peak period to ride out a super heating event effectively. As people are coming home in the evening, turning on appliances, ramping up air conditioners to cool down their houses, that’s the maximum point of stress on the system.

That net peak, just after sunset, is also when over 10,000 megawatts of solar power stop generating. For most of the day, solar effectively acts like negative load, reducing demand for electricity from other resources. As the sun sets, those other resources have to ramp up rapidly to meet the load on the system. California just did not have enough dispatchable capacity available to meet demand. The resource adequacy planning and procurement standards hadn’t quite kept up.

The third variable involved elements of the energy market administered by CAISO that are not problematic during periods of surplus energy and surplus capacity but, under periods of significant strain, do not provide system operators a clear enough view of the actual physical supply and demand for power.
This combination of factors—really hot temperatures across the West, very high loads, lower imports to California, insufficient dispatchable capacity into the evening net peak hour, and an energy market that didn’t give CAISO a clear enough view of the actual supply and demand—all contributed to the rolling blackouts. On August 14, 491,600 electricity customers lost power between 6:30 p.m. and 7 p.m. for anywhere between 15 minutes to two and a half hours. The next evening, 321,000 customers lost power, with downtimes ranging from 8 to 90 minutes.

Fortunately, after coordinating demand response by consumers and big industrial customers and making some adjustments to managing the market, the CAISO was able to get through days and days of really hot temperatures after August 15, including another big breakout of heat over the Labor Day weekend, without any disruptions in service, but it was close. It was a pivotal moment for the state with important lessons learned.

Q: How do you build a system that recognizes the need to adapt to climate change while remaining reliable and resilient?

People, business, and industry want and need reliable electricity. But I think the population out here also recognizes the increasing climate risks. These fires in California are devastating to live through. The heating events create a real sense of urgency.

California has embarked on a fundamental transformation of its power system to address climate change. The state has set a goal of being carbon neutral by 2045. That means the patterns of demand, the patterns of production, and the nature of the operation are going to be very different than they were in the past.

We need to be really pragmatic. We need to approach this with honesty and objectivity to make sure that we get a resource base that can meet those clean energy goals in a way that keeps the lights on.

We’re not going to be running coal and will be significantly reducing our dependence on natural gas plants; we’re going to be running wind, solar, and energy storage. Over time, we’ll probably incorporate emerging technologies like hydrogen and other clean fuels that we’re just now starting to really experiment with. If our infrastructure is not ready and our market operations are not integrating these resources effectively, we’re going to run into problems.

In the state and the region, everyone is working on infrastructure sufficiency, market design, and coordination. The big asset that California has over Texas is an energy market that spans multiple states. We have increasingly effective communication and coordination with our partners in the Pacific Northwest, Desert Southwest, and the Rockies. We can take advantage of the geographic and resource diversity that exists across the region, and basically help each other out if we get into trouble.

Q: How do the markets in California and Texas compare?

Today, California’s market is, in many ways, a diametrical opposite of the Texas market. When California did a partial deregulation in 1997, the design was similar to Texas’ model of paying generators only for the electricity they turn into the grid. The idea was that short-term price signals would incentivize generation.

After the very disruptive experience of California’s power crisis in the early 2000s, the state established resource adequacy standards and requirements for the utilities to procure their needs in advance. The new system established mechanisms for the utilities to buy that capacity on a forward basis because the state does not subscribe to the economic theory of allowing runaway prices to drive generation. Prices, and the energy market generally, are much more closely regulated in California.

However, regardless of market design, if you don’t have sufficient capacity in the ground to ride through heating or cooling events, and you don’t operate that capacity efficiently, you’re going to run into problems.

Q: There were some early statements after the blackout in Texas putting the blame on renewable sources.

It was disappointing to see the opportunism following the crisis in Texas, with people saying, “This is evidence for why we can’t decarbonize our power system.” It has been factually demonstrated that the primary contributor to the Texas outage was unwinterized natural gas systems freezing at a moment when the state needed thousands and thousands of megawatts of thermal generation coming online. Wind energy turbines freezing up was a much smaller factor.

We found the same thing in California. The wind and solar energy resources performed largely as anticipated. But they are fuel-displacement resources that provide carbon-free energy to the system. We know they don’t provide dispatchable capacity, so we need to pair them with other resources. Certainly, the changes that are underway in the power system were contributing factors to what happened in August in California. Clearly, we need to accelerate and get better at that pairing. It’s going to be the critical factor over time in maintaining reliability.

“The super heating and super cooling events that we’re seeing in California and Texas are evidence that we need to redouble our efforts to fight climate change rather than retreat. These are solvable problems.” 

At the end of the day, if anything, the super heating and super cooling events that we’re seeing in California and Texas are evidence that we need to redouble our efforts to fight climate change rather than retreat. These are solvable problems.

Q: How are you planning for next summer?

We are doing everything we can to be ready to ride through what may be another very hot and dry summer. We need to produce better results this summer; that’s priority number one. The California Public Utilities Commission has encouraged the utilities to do as much forward buying as possible in advance of the summer.

We’re not expecting a ton of new capacity to be coming online between now and the summer; it’s too tight a timeframe. But the incremental dispatchable capacity resource that is coming on the grid is roughly 2,000 megawatts of lithium ion batteries, which can discharge electricity into the grid during that net peak period of maximum strain on the system, just after sunset on hot summer nights. We’re working closely with the battery storage community to ensure that their resources can play an important role in supporting reliability this summer.

We’re also making a big push on the demand side. When we start seeing the system get into serious, excessive demand, we put out a Flex Alert notice to power customers across California through the utilities, the media, even through the governor’s office. The Flex Alert provides small steps that consumers can take to help reduce their demand on the system. That can be the difference between supply meeting demand and not.

And then the last thing is we’re running what are effectively tabletop exercises between California and the adjacent system operators so that we can anticipate the kind of heating events that might happen, understand how the different systems are preparing for them, and make sure that we have the communication protocols in place to help each other out if systems are strained.

Q: At the same time, you’re working to fundamentally restructure the grid by 2045?

Absolutely. We have to do both simultaneously. Having joined CAISO last October, I can say the sense of urgency among the regulatory and planning entities in California is very high. We are working to make sure that CAISO, the California Public Utilities Commission, and the California Energy Commission coordinate effectively on the planning, procurement, and operations required for reliable decarbonization.

It’s going to take a portfolio approach, opening up new fuels, new storage technologies, investments in energy efficiency, and demand response. California is starting to look at off-shore wind. We’re exploring new energy-storage technologies that can supply power for longer durations compared to the four-hour duration of lithium ion batteries.

I think green hydrogen has tremendous potential. It uses renewable power to split water into hydrogen and oxygen. In Utah, a coal-fired power plant that serves a consortium of utilities including the Los Angeles Department of Water and Power is being retrofitted to run on green hydrogen. It’s using the existing footprint of the plant and the big transmission line that runs to California. Initially it will burn a combination of natural gas and hydrogen; the aim is to have it entirely powered by green hydrogen by 2045.

There’s also a tremendous push for developing technology behind the meter, pairing solar panels with batteries in people’s homes to be available to the grid under periods of stress.

We will also need additional capacity to support the electrification of the vehicle fleet and to take the place of fossil fuel systems that are coming offline. The California Public Utilities Commission is making sure that the utilities have the incentives and cost-recovery mechanisms to buy expanded capacity.

CAISO and the big transmission owners in California need to make sure that the grid, substations, and transmission lines are updated, expanded, and modernized at a pace that will ensure that as new resources come online, they can be physically connected to the system. The people I work with are incredibly dedicated. It’s really challenging, but it’s also inspiring to be part of this clean energy transition.

Q: How do you pay for the transition?

That’s a great question. The Public Utility Commission recently held a meeting on that exact topic. The rate increases needed to accomplish this clean energy transition could get unwieldy if it’s not managed very effectively. There are also concerns about equity. People who are purchasing rooftop solar and batteries are leaving behind significant fixed costs to be paid for by a shrinking pool of consumers. Many of those consumers can’t afford to buy their way off the grid.

The state is full speed ahead towards meeting its clean energy objectives while understanding that energy rates and equity are critical variables that need to be addressed.

The political leadership in California absolutely sees the risks of inaction on climate. They’ve been living it through the forest fires, heat, drought—just so many significant changes in the natural environment. The costs of not managing climate change are so high, they’re almost impossible to estimate.

That said, I hope I’ve conveyed my optimism. Too many people are trying to run the clock backwards. That’s not a legitimate option. I think it’s important right now for those of us who really see the risks and the imperatives to stand up and demonstrate the commitment, momentum, and passion to make change happen.

Interview conducted and edited by Ted O'Callahan.