Anxious about Adequacy


Reliability watchdog eyes plant retirements

In its modern form—the one with regulatory teeth belatedly installed—the North American Electric Reliability Corporation (NERC) is the product of an Act of Congress adopted in response to the August 2003 grid failure that darkened seven eastern states and part of Canada; inconveniently, the part where most of our northern neighbor’s populace lives.

The 2003 blackout, its westward progress halted at the edge of Illinois’ Commonwealth Edison system—one utility short of Wisconsin—was initiated by the garden-variety mishap of a FirstEnergy transmission line, ever so slightly lengthened by summer heat and heavy air-conditioning loads, sagging into indifferently-trimmed Ohio treetops and triggering outages cascading all the way to the East Coast, leaving some 55 million people in the dark for two days.

Whether NERC officials now yearn for happier times when poorly managed vegetation was the most fearsome threat to a reliable electric grid, no one has said. But the organization recently issued a report on a theme raised more than once during America’s transition between different ways of producing and delivering energy. That would be the question of what pace can be considered safe in sidelining key components of the energy system we’ve long counted on and still do, for power exactly when it’s needed or wanted, 24 hours a day, seven days a week.

A Receding Goal Line

Last December 18, NERC issued its “Generation Retirement Scenario,” a report it referred to as a “Special Reliability Assessment.” An implicit conclusion to be drawn from the assessment is that the harder state, local, and federal policy makers try to make good on increasingly common promises to mandate “zero-carbon” electricity, the more natural gas-fired generation capacity they’ll need to see added as insurance against system reliability problems.

“Large-scale retirements would likely create the need for electric and natural gas infrastructure, expedited buildout of new generation and increased use of demand-side resources,” according to the assessment, referring, in the last instance, to coordinated reduction of power usage by retail energy consumers to bring consumption in line with production.

The assessment does not portray the challenges for power providers as unmanageable. It examines coal-fired and nuclear generation retirements by 2025 already identified by NERC and the Energy Information Administration (a statistical arm of the Department of Energy,) and forecasts that were those retirements accelerated by just three years, all or parts of 14 states could fall below planning reserve margins and face “resource adequacy issues.”

A NERC statement accompanying release of the assessment characterized the need for “risk-informed planning” as a normal part of managing power plant retirements, but added that “The pace of current change creates potential challenges to reliability that should be understood and addressed.”

“Transmission upgrades or reinforcements, combined with new generation dispatch requirements and operating procedures, could be necessary to maintain the reliability of the bulk power system during the transition,” the NERC statement said.

Regulatory flexibility will also be called for “to facilitate timely construction of new infrastructure or to accommodate short-term extension of generating units scheduled for retirement,” NERC said.

The assessment did not find Wisconsin among the states most at risk from accelerated plant retirements. It indicated resource adequacy challenges were most likely to occur in the Carolinas, the Dakotas, Nebraska, Kansas, Oklahoma, Colorado, Wyoming, New Mexico, Arizona, and parts of Arkansas, Missouri, and Texas.

Were a reliability problem to occur in Wisconsin, the most probable instigator would be a repetition of the 2013-14 Polar Vortex episode, the assessment indicated, as the Midcontinent Independent System Operator (MISO) that oversees Wisconsin’s (and the region’s) wholesale power market could expect to see its demand rise to 107 percent of normal, even after all load-control strategies were implemented. Under that scenario, the assessment projected, MISO could expect to see its coal-fired capacity derated by 15 percent in the bitter cold conditions, its gas by 30 percent, and all of its wind and solar capacity unavailable.

Criticism Abounds

The assessment’s release was greeted with scorn by a number of interest groups, who tended to characterize it as unrealistically based on assumed scenarios that are exceedingly unlikely to occur, and unworthy of consideration in any serious utility resource planning process.

The most intense objections, however, appeared to be driven by concern that the assessment would be used to justify proposals for a federal bailout of baseload coal and nuclear plants, an idea that’s run into strong opposition even within the Trump administration where it originated.

Utility Dive, an online industry newsletter, quoted Devin Hartman, CEO of the Electricity Consumers Resource Council, characterizing NERC’s accelerated retirement projections as a “dream world scenario” that’s impossible, given resource planning programs that are standard in most regional wholesale power markets.

Ironically, even interest groups whose membership would presumably benefit from building infrastructure to ward off potential generation shortfalls found fault with the assessment. Utility Dive quoted an official of the Natural Gas Supply Association calling NERC’s retirement scenarios “too extreme to offer useful takeaways about reliability,” but adding, in an apparent reference to feared bailouts for competing coal or nuclear plants, “Certainly, there is nothing here that warrants or supports the use of out-of-market actions.”

Nevertheless, as far back as September 2014, long before anyone brought up the idea of federal market interventions aimed at rescuing the coal or nuclear industries, the Government Accountability Office (GAO) announced that retirements of coal-fired generation capacity were already occurring or scheduled at a faster pace than the upper limit of projections the agency reported just two years earlier.

The trend continues. In the past few years, seven (emission-free!) U.S. nuclear units have closed well ahead of their scheduled license expirations, and roughly a dozen eastern and Midwestern nuclear units are either currently obtaining or are lobbying for taxpayer or ratepayer subsidies as the only alternative to early shutdowns. It can be vigorously debated how much of this is legitimate economics and how much is political rent-seeking, but it’s certainly true that a lot of generating capacity might cease functioning years before anyone involved in resource planning thought that would happen.

Along with its overly modest plant retirement expectations back in 2012, the GAO issued recommendations that federal agencies with energy oversight responsibilities apply coordinated scrutiny “until at least 2017 to monitor the complexity of implementation and extent of potential effects on price and reliability.”


No Magic Answers

Key assumptions behind NERC’s December assessment report might well prove as unrealistic as the critics contend. But regrettably, so might some of the common and surprisingly carefree assumptions regarding the ease with which renewable generation can displace coal, gas, and nuclear in the nation’s energy mix.


Energy production is not magic. Renewables, chiefly wind and solar, are usable when the weather or time of day (or night) permit—or not. That, and the problem of limited travel range for electric vehicles, is pretty much the whole reason for the quest to develop better battery storage. Pending some breakthrough no one has yet foreseen, it remains an uphill quest.

Last summer, in an article whose first sentence clearly depicts natural gas-fired generation as a blight on the landscape, MIT Technology Review conceded that “Fluctuating solar and wind power require lots of energy storage, and lithium-ion batteries seem like the obvious choice—but they are far too expensive to play a major role.”

At scales larger than the replacement of small, natural gas-fired “peaker” plants that run only when demand is highest, the MIT article says, “batteries run into real problems.” It cites a study that found “steeply diminishing returns” from coupling battery storage with renewables, calling the method a “weak substitute” for coal or gas-fired combined-cycle plants “that can be tapped at any time, run continuously, and vary output levels to meet shifting demand throughout the day.”

Feel free to take coal out of the equation; gas is supplanting it anyway and that seems unlikely to change. But before dismissing the need to make accommodations for reliability’s sake, remember that the Massachusetts Institute of Technology headlined its article, “The $2.5 trillion reason we can’t rely on batteries to clean up the grid.”—Dave Hoopman