The Messenger Shoots Back


Reliability Warnings Ring True

Baseball lore is almost certainly mistaken in attributing to Lawrence “Yogi” Berra the observation that “It’s tough to make predictions, especially about the future.” But whoever uttered the words, what’s lost in the hilarity is that the peculiar remark is fundamentally true. Consider the reaction when the North American Electric Reliability Corporation (NERC) earlier this winter issued cautionary projections about future strains on electric generation capacity.

Interest groups representing high-volume electricity users and segments of the energy industry instantly denounced the NERC report, using terms like “dream world scenario” and “too extreme to offer useful takeaways.” But in the brief 10 weeks since, new reports have suggested that regardless of whether the NERC analysis plays out in detail, it can’t safely be ignored.

Early Warnings

Just last month, Wisconsin Energy Cooperative News examined the NERC report issued a week before Christmas under the title “Generation Retirement Scenario” and labeled as a “Special Reliability Assessment.”

It projects what might happen over a half-dozen years if retirements of baseload (coal and nuclear) power plants accelerate modestly beyond their present pace. It found that if retirements already scheduled between now and 2025 begin occurring just three years earlier than currently planned, (Three years is roughly one-third the time typically needed to build a major new transmission line or power plant, from proposal through regulatory review, to commercial operation.) generating capacity in all or parts of 14 states could fall
below reserve margins, straining “resource adequacy.”

The interest-group ridicule lasted about three weeks before regulatory officials in one of the 14 states—Texas—ran up a warning flag. On January 7 the Houston Chronicle said the newly announced closure of one, 470-megawatt coal plant in the state with by far the nation’s greatest wind generation capacity “reduces the state’s already tight power reserves and is sparking forecasts of higher electricity prices.”

The Chronicle quoted the chair of the Texas Public Utility Commission calling the reduced generation availability for this summer “very scary,” and noted that power supply contracts on futures markets reflected similar concern, with contracts for August trading more than 60 percent higher than the summer peak in 2018.

Soon after the Texas announcement, price concerns surfaced in New York. Bloomberg Environment reported January 18 that state officials’ plan to eliminate all coal-fired generation precipitated an electricity futures market spike that turned into a plateau.

The state has only two functioning coal plants, with a combined capacity of 1,010 megawatts. Last spring when the Department of Environmental Conservation proposed a carbon dioxide emission limit the plants would be unable to meet—intending to force their shutdown by the end of 2020—futures prices for 2021 and 2022 quickly jumped one-third higher and stayed there.

Warning signs reported the same day from Georgia were more subtle. The CEO of Atlanta-based mega-utility Southern Company said subsidiary Georgia Power will, for the first time, build system resilience considerations into its resource planning.

Southern Company hopes to have no or few CO2 emissions from its generating fleet by mid-century, but fossil fuels—mainly natural gas supplanting coal—will still be needed, CEO Tom Fanning told a Washington, D.C., energy conference. Moreover, Fanning said the company’s coal plants could be mothballed but held in reserve “in the event that you have a resiliency emergency,” the online newsletter UtilityDive reported.

Retirements Rising

In 2004, federal energy officials were projecting that at then-current consumption rates, domestic natural gas reserves would be so depleted by the middle of this century as to no longer be practical for mass-market use.

Today, that sounds preposterous. In 2018, natural gas supplied 35 percent of all U.S. electricity generation. In mid-February Bloomberg New Energy Finance released its “2019 Sustainable Energy in America Factbook.” It reported coal had dropped to 27 percent of the U.S. generation mix, the least since the Second World War and good news for those concerned about carbon dioxide, because natural gas combustion emits approximately half as much as coal for the same electricity output.

The Factbook also reported something eye-catching for readers of December’s NERC analysis: Coal-plant retirements “accelerated in 2018.”

“The pipeline of future retirements has grown as well,” the Factbook added. “Companies now plan to retire another 17 gigawatts over 2019–20. As of the end of 2017, they had projected just four gigawatts of closures.”
That may be all right; nobody said the U.S. generation mix should never change. The NERC report’s objective is to urge a smooth transition, and Bloomberg does note that 20 gigawatts of new gas-fired capacity came online in 2018.

But shrinkage of the nuclear fleet continues, and mid-February brought the first mention of Chicago-based Exelon pondering early retirement for six Illinois units. Additional nuclear retirements could be triggered by litigation pending in Illinois and New York.

The Vexing Vortex Readers may recall Wisconsin wasn’t among the 14 states NERC warned about tight capacity margins if generation replacements don’t stay ahead of retirements. A likelier challenge for Wisconsin would stem from the Polar Vortex returning to the upper Midwest, NERC said.

Six weeks later the vortex was back.

Cold-related problems affected gas infrastructure in Minnesota and Michigan. Xcel Energy provided motel accommodations for residents of several small communities while they dealt with low pressure problems on a pipeline, and Consumers’ Energy was compelled to interrupt service to nearly 20 automotive plants when fire damaged a natural gas compression station.

Not tested in this year’s deep freeze but a big “what if?” is the character of future generation. As states and municipalities adopt legislation mandating 100 percent emission-free electricity—essentially wind and solar—analysts necessarily ask how those arrangements would have fared in our late January weather.

The same day Bloomberg’s expansive report was published, the Wood Mackenzie consulting firm released a paper giving good marks to the grid’s vortex performance. It also analyzed what could have been expected with 100 percent renewable energy.

Wood Mackenzie determined that with enough new capacity added for wind and solar to equal the power furnished by today’s grid, people would still have lacked electricity for several hours each day due to the absence of massive energy storage—battery—capacity. The challenges of battery storage were detailed in the Massachusetts Institute of Technology’s article cited here last month, titled “The $2.5 trillion reason we can’t rely on batteries to clean up the grid.”

Prediction = Prevention?

It won’t be known for a few years whether NERC’s projections from three months ago are borne out. They shouldn’t be. The purpose of visualizing the ingredients of a future generation shortage is to ensure its prevention.

But the energy industry is changing rapidly and governments, interest groups, elements within the industry, and a significant percentage of the general public say they want it to change faster.
Predicting the future is going to be tough.—Dave Hoopman