Last month, the California Independent System Operator quietly announced that it could face a record-breaking need for curtailments -- paying, or forcing, generators to stop pumping electricity into a transmission grid that just doesn’t have the demand for it at the time.

“With the bountiful hydro conditions expected this year and significant additional solar installations both in the form of central station and on rooftops, we expect to see significant excess energy production this coming spring,” CAISO CEO Stephen Berberich wrote in a memo to the grid operator’s board of directors. “Currently, the forecast is that we could have the need to curtail from 6,000 [megawatts] to 8,000 [megawatts].”

Managing oversupply conditions isn't new to CAISO, spokesperson Steven Greenlee said. But, he added, “We haven’t had this potential amount of excess supply on the grid before.”

The biggest contributor is the heavy rain and snow that has helped California fill its depleted reservoirs. Many of them are now so full that they’re likely to go into "spill" mode this spring, Greenlee said. And “when they’re in spill and they’re generating electricity, we have to take that electricity, because they can’t turn their generators off."

California hasn’t had so much hydro power coming on-line since 2011, he said. And that was years before solar power became a significant contributor to the state’s midday energy mix. “We didn’t really start adding solar until 2014,” he said. But CAISO has added about 2,000 megawatts per year since then, totaling 9,792 megawatts in June of last year. “We expect it’s going to [bring on-line] another 2,000 megawatts from 2016 to 2017,” he said.

All of this solar has led to what CAISO calls the “duck curve” -- a deep dip in demand during solar-saturated midday hours, followed by a steep ramp as solar fades away. And this supply-demand pattern is happening even faster than CAISO first predicted in 2013, he said. An analysis by energy consultancy ScottMadden found that California is about two years ahead of CAISO’s duck curve schedule, in terms of the lows it’s hitting on certain sunny, mild spring days, when solar power surges and air conditioners aren’t being turned on to soak it up.

Add must-take hydro to the mix, and California is looking at a combination of clean energy resources at volumes it hasn’t faced before, Greenlee said.

CAISO’s curtailment plan: From "decremental" bids to "exceptional dispatch"

Curtailment is generally the last step in a long process governed by CAISO, as manager of a commodity market that has to be kept in perfect balance at all times. First of all, when supply of power of any kind exceeds demand, prices drop, and generators can reduce output in response, if they have the flexibility and economic incentives to do so, Greenlee said.

Of course, most of CAISO’s oversupply is coming from generation resources that lack that flexibility, which has led to an increasing incidence of negative pricing.

CAISO’s next step is to offer generators the opportunity to make money by reducing their power output, he said. “Once we go into an excess or oversupply condition, our market first goes out and sends signals to the generators that say, ‘How much would you take, bid in as a price, to reduce or quit producing?’”

That’s called a "decremental" bid, as opposed to an incremental bid that pays generators to increase production, and through it, “The market solves that oversupply almost in every instance,” he said.

If all of these market measures fail to bring supply in balance with demand, “We will go in and start manually intervening in the market,” he said. “We will cut self-schedules, and if that hasn’t worked, we will ‘exceptionally dispatch’ units to go offline.”

These manual "exceptional dispatch" interventions do occasionally happen, he said. But they’re very rare. Out of the 240 million megawatt-hours or so that CAISO delivered in 2016, it curtailed about 308,000 megawatt-hours, almost all of it through decremental bids. Self-scheduled cuts and manual interventions made up 1 percent or less of that total, he said.

But “unless we take actions to mitigate the excess supply, the times we’ll have to manually intervene in the market will increase,” he said. "We’re seeing our oversupply earlier than what we have forecasted. We’ve got to keep pressing on and implementing new solutions."

Looking for solutions: Flexible solar farms, broader grid markets, time-of-use pricing

CAISO has far fewer levers to pull on the demand side of the equation, Greenlee noted. California does have hundreds of megawatts of demand response, of course. But that doesn’t really help solve the oversupply problem, since it’s set up to get customers to reduce their power use. A demand-side effort to solve curtailment would instead encourage people to use more electricity, he said.

That could happen through time-of-use pricing schedules or special tariffs that offer exceptionally low prices, or even direct payments, during periods of oversupply. California is in the midst of shifting all of its big utilities to time-of-use rates by 2020, and CAISO is working with the California Public Utilities Commission to “develop the rate tiers to incentivize people to use excess energy when we have it, which is now in the mid-mornings to mid-afternoons,” Greenlee said. “That’s kind of a flip -- it used to be that the rates would disincentivize use during that time.”

CAISO is also increasingly relying on its links to the broader U.S. Western grid, he noted. In 2014, it expanded its Energy Imbalance Market to include Rocky Mountain state utility PacifiCorp, as well as Nevada utility NV Energy. This real-time market is useful to find demand for excess energy, in what CAISO calls “avoided curtailment,” he said. This chart shows that most of the transfers are happening during the same midday hours that solar is generating at its peak, indicating the source of the megawatts being exported.

CAISO also wants the California legislature to pass a law allowing it to expand its balancing authority, said Greenlee. “Then we could optimize all of those resources in the day-ahead timeframe, rather than dealing with excess supply through our real time Energy Imbalance Market,” he said. Day-ahead markets are a lot easier to participate in than real-time markets, opening up a broader potential customer base. CAISO’s plans were put on hold during last year’s busy legislative session, but Senate Bill 350, the omnibus energy bill passed last year, requires that the state explore it as part of its renewable energy goals.

While solar farms are the main driver of the duck curve, they don’t have to just be passive providers of power, he added. Last year, CAISO joined First Solar and the National Renewable Energy Laboratory (NREL) in a project to prove that PV farms can shape and shift energy output through advanced inverter controls, in ways that could rival natural-gas-fired speaker plants, at least in terms of fast-acting frequency response.

But as more solar comes on-line, curtailments are likely to increase, which could create an “economic limit to deployment” for solar power in California, as NREL noted in a recent study on the state’s 50 percent by 2030 renewable portfolio standard goals. “If we have to start turning renewables down or off, it undermines the effort to reach the goal that the renewable portfolio standard sets,” Greenlee said.

CAISO has predicted that it will see 13,000 megawatts of solar power on the grid by 2020, giving the state “thousands and thousands of megawatts we’re going to have to deal with,” he added. “We’re already being proactive in looking for solutions,” such as launching the country’s first market opportunity for distributed energy resource providers, or DERPs, to aggregate solar, demand response, energy storage, electric vehicles or other flexible loads into resources for its energy market.

At the same time, CAISO’s role has its limits, Greenlee said. It doesn’t track demand by end user -- “All we do is get a schedule in that says to deliver 100 megawatts of electricity to four hours to a particular substation.” That means it doesn’t directly track what’s going on with rooftop solar on the distribution grid, besides seeing it as a reduction of load. “That’s behind the meter, and we’re still wholesale.”