California, the coming retirement wave and the return of capacity pricing


This ICF International white paper explains how resource adequacy (capacity) prices at current levels are likely to result in mass retirements in the midterm.

Much of the existing dispatchable capacity is being paid too little for reliable performance. California is engaging in numerous unprecedented experiments simultaneously: ambitious demand side management (DSM) programs, distributed generation (DG), storage, renewables (especially intermittent renewables), and CO2 regulations.

Investment in existing generation will remain a contrarian play for the next five years. The contrarian play arises in part because changes in capacity pricing can occur quickly and with little or no warning (as New England capacity markets recently experienced). We note the symptoms of these potential issues could first surface in or around load pockets; therefore, generation assets strategically located in or around these load pockets might be currently undervalued.

Key discussion topics include:

  • Capacity procurement in California
  • Market outlook
  • Once–through cooling
  • Flexible capacity procurement mechanism
  • Resource adequacy program pricing
  • California Independent System Operator (CAISO) capacity procurement mechanism

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