Overseers flag concerns as system shifts to gas, renewables

Source: Hannah Northey, E&E reporter • Posted: Thursday, November 13, 2014

A national surge toward natural gas and renewable energy driven by cheap gas and new government rules and policies is creating reliability concerns — especially in the Midwest, New York and Texas — and weakening buffers for blackouts, grid overseers warned today.

And those problems loom even before considering the impact of U.S. EPA’s power plant initiative, the North American Electric Reliability Corp. said.

Atlanta-based NERC’s annual long-term reliability assessment says reserves of on-hand electric capacity for grid reliability are declining in the Midwest, New York and Texas despite historically low demand for electricity.

Power plant closures, a slowdown in new construction and retirements triggered by new environmental regulations are hampering power supplies in those areas and cutting reserve margins, John Moura, NERC’s director of reliability assessment, told reporters on a call today. Moura noted that although Texas has new capacity coming online that will elevate reserves through 2018, the state’s reserve margins are slated to dip thereafter.

NERC is responsible for crafting reliability and security standards subject to reviews by the Federal Energy Regulatory Commission.

The grid monitor sees more than 83 gigawatts of fossil and nuclear capacity being retired between 2011 and 2024. Slightly more than 44 GW of coal-fired generation will be retired between now and 2024 and almost 30 GW of gas-fired generation, NERC said. The outlook is a slight decrease from its assessment last year, whichfound more than 85 GW of capacity could be retired by 2023.

Although NERC’s assessment did not include the potential effects of EPA’s proposed Clean Power Plan under Section 111(d) of the Clean Air Act, the report did analyze and question EPA’s assumptions about efficiency and infrastructure, and made clear the proposal has clear implications for grid reliability.

The Clean Power Plan will accelerate the nation’s shift toward natural gas, solar and wind, and a stronger focus needs to be placed on the long construction timelines for new transmission and pipelines, NERC said. Citing a recent study conducted by Energy Ventures Analysis, NERC noted that under EPA’s proposal, almost half the country’s generation could come from gas-fired generation by 2040 — and more than the traditional three-year lead time for gas pipeline projects will be needed.

“With this shift toward more natural gas consumption in the power sector, the power industry will become increasingly vulnerable to risks from natural gas supply and transportation issues,” NERC wrote. “Adverse winter weather, such as the 2014 polar vortex, provided an example of the potential impacts to supply and transportation.”

NERC also said that EPA assumes energy efficiency will grow at a rate that “exceeds recent trends and projections,” and that the implications of such an assumption — or the failure of that scenario to play out — are complex and could put states in precarious situations.

“What we’re really concerned with is really the spillover effect that can occur within that proposed plan, where if you don’t achieve those levels of energy efficiency that are expected, you’ll have to make up that carbon reduction in different ways, which could include [renewables], retirements of other coal resources,” Moura said.

A new resource mix is going to require new approaches to assessing reliability, something NERC through its Essential Reliability Services Task Force hopes to implement during the next one to two years, Moura said. Such an approach would consider the characteristics of wind and solar, and the need for services that baseload plants provide, including voltage support.

“If we continue to go down the path of only looking at resource adequacy, that assumes every megawatt is a one-for-one replacement, and we need to start conducting future reliability assessments understanding that is not the case,” Moura said. “As we add in certain resources with different reliability characteristics, we’re going to need a new approach, new tracking, monitoring and measurement to ensure we can maintain the right [services for reliability].”

Separate report on EPA rule

Today’s report arrives on the heels of NERC’s issuance last week of a report that highlights grid reliability concerns with EPA’s Clean Power Plan (Greenwire, Nov. 7). EPA later criticized NERC’s draft analysis, saying the organization overlooked new capacity that will be built by 2020, namely new natural gas and renewable generation that would help offset retirements of older coal-fired units, aided by improvements in efficiency that will decrease demand.

Tom Burgess, NERC’s vice president and director of reliability assessment and performance analysis, told reporters that NERC is “looking at both sides of the coin,” including retirements anticipated for a number of reasons, as well as new generation on the horizon and the need for more infrastructure.

But John Moore, senior attorney with the Natural Resources Defense Council, said both the long-term assessment and NERC’s analysis of the EPA rule need to take a more holistic approach, and focus on the reliability benefits of clean energy as opposed to simply analyzing the challenges of a changing energy landscape.

“In particular, NERC should take a closer look at the reliability values of wind and solar,” Moore said. “For example, wind is now dispatchable and can provide vital grid reliability services. This is truly the time for regional and larger transmission system planning with grid operators and states working closely together to ensure these clean, renewable resources are sufficiently integrated so that we will have a reliable grid and lower customer bills.”

Burgess told reporters today that it’s too early for grid operators to estimate what kind of consequences a newly announced U.S.-China deal could have on EPA’s carbon proposal or grid reliability.

“We have an eye on it, and we’ll be monitoring it,” Burgess said.