CAISO Resource Adequacy: Forecasts, RA Market Insights & Merchant Curves

Changing Fuel Mix

California’s resource mix has changed significantly with the rapid growth of solar and battery storage, alongside continued pressure on conventional thermal generation. High solar penetration has contributed to the “duck curve,” where net load falls during midday hours and rises sharply in the evening as solar generation declines while demand remains elevated. This increases the reliability value of flexible resources such as battery storage, fast-ramping gas plants, and demand response.

Thermal retirement pressure also affects available RA supply. California’s Once-Through Cooling (OTC) regulations have contributed to the retirement pressure on older coastal gas-fired power plants. Although the planned retirement of Diablo Canyon was postponed under SB 846 due to reliability concerns, thermal retirements remain an important structural driver of RA market tightness.

Battery storage has become a major component of California’s capacity mix. California remains one of the largest U.S. battery storage markets, with more than 16,900 MW of installed battery storage reported by the California Energy Commission by mid-2025. However, this figure includes residential, commercial, and utility-scale installations, so it should not be treated as fully equivalent to RA-eligible capacity. Batteries now support system reliability by shifting energy across the day and providing flexible capacity during tighter system hours.

Accreditation

Installed capacity does not translate directly into RA value. Resources receive different accredited capacity values depending on their expected contribution to reliability during critical system conditions. Flexible and dispatchable resources, such as batteries and thermal plants, generally receive stronger accreditation than variable renewable resources, while solar and wind receive lower accredited values because their output depends on weather conditions and time of day.

Seasonality is also important. A resource’s RA value can vary by month depending on its expected availability and contribution to system reliability. Under California’s RA framework, Net Qualifying Capacity and Slice-of-Day rules are central to determining how resources count toward RA obligations. The CPUC’s 2025 RA guide presents the Slice-of-Day framework used for RA compliance. For batteries, accreditation expectations are central to revenue modeling because the marginal reliability contribution of additional storage can change as storage penetration increases.

State Clean Energy Policy

California’s clean energy policy framework also shapes RA supply. The Integrated Resource Planning process, CPUC procurement orders, and long-term decarbonization objectives influence both new resource development and retirement timelines. Therefore, CAISO RA prices cannot be analyzed only through market fundamentals; the policy pipeline must also be considered.

Load Forecast

On the demand side, RA procurement requirements are mainly driven by load forecasts. Load-Serving Entities must procure enough accredited capacity to meet expected demand plus the applicable reserve margin. When load forecasts increase, RA obligations rise, which can tighten the market and put upward pressure on capacity prices.

Future load growth from electrification, electric vehicles, weather volatility, and economic activity therefore represents a key demand-side driver for CAISO capacity prices.