In my previous post I covered the impact of the Inflation Reduction Act and the way challenges with grid infrastructure will act as a brake on climate goals. In this post I will look at another major challenge being confronted by US grid operators: blackout risks. The premature closure of conventional generation is posing real risks of electricity shortfalls across the country, leaving grid operators begging consumers to cut demand in order to keep at least some of the lights on. I also covered this topic in a recent article for the Telegraph newspaper.
Blackout risks are growing as conventional generation is prematurely retired
In early 2020, the California Independent System Operator (“CAISO”) used historical weather patterns to calculate a 0.15% chance that the state would experience electricity shortages during the peak summer demand season. However, there was a heat wave, accompanied by some of the region’s worst recent wildfires, which caused power plants and transmission equipment to fail just as homes and businesses increased air conditioning use, triggering some of California’s worst outages in decades. The fires also disabled inter-regional interconnectors that could have drawn power from other regions. California’s increasing reliance on renewable energy contributed to the problem – outages increased as the system operator struggled to replace lost solar output at sun-set.
Then in winter 2020/21, ERCOT was caught off guard by a prolonged cold spell which caused blackouts across much of the state. Nearly 250 people died, mostly from hypothermia, according to the Texas Department of State Health Services. Prior to the February 2021 freeze, ERCOT’s modelling had concluded that the state would have about 40% more power capacity than it needed for winter, failing to anticipate either the extended cold weather or the fact that many utilities had failed to properly winterise their equipment.
As a result, there was a massive electricity shortfall, and several million Texans were left without water and power for days. While these blackouts were not caused by reliance on intermittent generation, the indicate the vulnerability of the market when grid infrastructure is not properly maintained, risks which I discussed in my previous post.
More recently, over the past month ERCOT has issued multiple conservation warnings including Conservation Appeals, the second most serious type of warning, in response to high temperatures and low wind output – a typical high pressure weather system which brings high temperatures and still conditions. Conservation Appeals signify that higher demand is forecast with a potential to enter emergency operations due to lower reserves. “Emergency operations” are load-shedding, in other words, rolling blackouts. The only level higher than this is an Energy Emergency Alert where system-wide emergency supply and demand conditions exist. ERCOT has deployed its Emergency Reserve Service in order to support the grid during the past few weeks and avoid shortfalls. Texas has a significant amount of solar capacity, but at sunset, on low wind days the system is left with a very small contribution from renewables and relies on gas to fill in the gaps.
MISO is currently experiencing similar conditions, although its grid is a little less stressed than in Texas. Generation has been dominated by fossil fuels as shown in the chart above, and the system operator has also issued various alerts in response to the heatwave.
“We anticipate challenging operating conditions throughout the entire week, and we will need every available resource at some point. We have issued several alerts and advisories based on the weather forecast. More emergency procedures may be required to keep the power flowing. That’s typical for a weather event like this,”– Jessica Lucas, executive director of system operations, MISO
MISO has a different set of alerts to ERCOT. It issued a “Max Gen Alert” and a “Max Gen Event (Step 2(a))” in the past couple of weeks, the latter being more serious in which the market is told to prepare for possible firm load shedding (among other things), and is one level down from the most serious type of alert in which rolling blackouts are implemented.
In California, CAISO has also issued emergency watch notices, warning that energy use could exceed supply as air-conditioning use soared in the heatwave – residents in the south of the state have been under an excessive heat warning.
These events are not unexpected. Back in June the EIA warned that two-thirds of North America was at risk of energy shortfalls in high summer heat, in its summer reliability report. It found that all 20 NERC assessment areas have adequate power resources to meet normal peak summer demand, but some areas are at elevated risk of supply shortages in the event of “more extreme summer conditions”, including the US Western Interconnection, SPP, MISO, ERCOT, SERC-Central, and New England. It summarised the risks as follows:
U.S. Western Interconnection. Resources in the U.S. Western Interconnection, which covers the western half of the country, are sufficient to support normal peak demand. However, widespread heat waves could put the area at elevated risk of energy supply shortfall because it relies on regional electricity transfers to meet peak demand as well as in the evening hours when solar power drops off. Parts of the Western Interconnection, especially California, host a large and growing share of generation from solar power.
SPP and MISO. SPP and MISO, which cover most of the central United States, are home to a significant amount of wind power. The intermittent nature of wind power (wind turbines only generate electricity if the wind is blowing, and how much electricity they generate depends on how windy it is) present operational challenges for grid operators. Wind output during periods of high electricity demand is a key factor in determining whether the system has sufficient electricity supply to maintain reliability in these areas. Low wind and high demand periods could result in energy emergencies.
ERCOT. Resources are adequate for normal peak summer demand in ERCOT, which covers most of Texas. However, there is a risk that dispatchable generation, such as generation from natural gas- or coal-fired power plants, in ERCOT may not be sufficient to meet electricity demand during an extreme heat wave with unusually low winds. Already in June ERCOT asked residents to voluntarily curb electricity use as a heatwave reached Texas. As in SPP and MISO, wind plays a significant role in ERCOT’s generation mix.
SERC-Central. The NERC assessment expects SERC-Central, an assessment area that includes all of Tennessee and parts of Georgia, Alabama, Missouri, and Kentucky, to have sufficient supply for normal peak summer demand. Utilities may deploy demand-side management—the planning, implementing, and monitoring activities designed to encourage consumers to modify their electricity usage—in cases of above-normal peak summer demand or high generator-outage conditions.
NPCC-New England. Although New England has less available capacity this summer than it had last summer, NERC projects that it still has sufficient capacity to meet normal peak summer demand. During more extreme demand or low resource conditions, operating procedures for obtaining emergency resources and electricity supplies from neighbouring areas are likely to be needed.
As yesterday’s Grid Brief explains, fossil fuels are what’s keeping the lights on in the US at the moment with gas dominating the grids in New England, New York and California, while increased coal as well gas generation has been needed in PJM, MISO and the Southwest.
Regulators and lawmakers have warned of the risks but new Agency proposes to make matters worse
Back in April, the lawmakers on the House Energy and Commerce Committee wrote to the Federal Energy Regulatory Commission (“FERC”) saying:
“Blackouts, brownouts, and energy rationing have become far too common in the past few years. The primary cause of the electricity shortages Americans have experienced in recent history is a lack of generation capacity…These shortages often happen in the cold of winter or the heat of summer. This is due, in no small part, to the premature retirement of dispatchable generation resources, like coal, nuclear, and natural gas, and the rapid expansion of intermittent resources, like wind and solar, onto the bulk power system.”
The FERC agrees. Appearing before the Senate’s Energy and Natural Resources Committee earlier this summer, FERC Commissioner Mark Christie said “the United States is heading for a reliability crisis. I do not use the term ‘crisis’ for melodrama, but because it is an accurate description of what we are facing.” Christie said that too many coal, natural gas and nuclear power stations are being mothballed too quickly, threatening security of supply. Jim Robb, CEO of the North American Electric Reliability Corporation (NERC), an agency which enforces grid reliability standards, told the same committee that operating the electric grid “ever closer to the edge” by relying on weather-dependent renewables will likely lead to “more frequent and more serious disruptions.”
Despite these warnings, the Biden Administration’s new Environmental Protection Agency (the “EPA”) has issued new power-plant emissions standards that will effectively dismantle baseload coal and gas capacity by 2030, much to the discomfort of grid operators across the country, while utilities have announced plans to retire more than 40% of the remaining US coal fleet by 2030.
The proposed rule — known as Rule 111 — would force most of the country’s coal plants to retire, with new wind, solar, battery storage, and backup natural gas plants being built in their place. The EPA’s proposal, announced in May, would effectively require existing coal-fired power stations without 90% carbon capture to close by 2035. New and existing gas-plant with a nameplate capacity of 300 MW or more and an annual capacity factor greater than 50% would be required to co-fire with 30% green hydrogen by 2032, increasing to 96% by 2038, or achieve 90% carbon capture by 2035.
The proposed rule was designed following a 2022 ruling by the US Supreme Court in West Virginia v EPA, which stated the Clean Air Act does not permit the EPA to require broad shifts in the nation’s generation mix without explicit authorisation from Congress. This Rule represents the third attempt under the last three presidential administrations to set carbon dioxide limits for electricity generation. The EPA is hoping that the generous tax credits for carbon capture and green hydrogen production in the Inflation Reduction Act will enable its targets to be met.
Representatives from ERCOT, MISO, PJM and SPP (identified as the “Joint ISOs/RTOs”) which between them serve over 150 million customers have criticised the proposal saying it would “greatly exacerbate an ongoing loss of critical, dispatchable generating capacity that is needed to ensure reliability.” The ISO New England also flagged potential reliability concerns for its six-state region, while CAISO urged the EPA to provide additional compliance flexibilities in any final rule.
They are concerned because to date renewable and storage additions have not been sufficient to replace the retiring conventional capacity to maintain reliability. Since 2000, the US has retired over 100 GW of coal capacity while adding almost 200 GW of renewables over the same period, however while 100 GW coal capacity delivers 100 GW of coal capacity ,200 GW of renewables, only delivers an equivalent of about 40 GW of capacity once intermittency is taken into account.
PJM noted that 40 GW of dispatchable thermal generation representing 21% of its current installed capacity is at risk of retiring by 2030. It worries that the addition of new capacity made up almost entirely of weather-dependent resources may be insufficient to maintain reliability. Rule 111 could force an additional 15 GW of coal capacity in PJM to retire early, pushing the overall level of at-risk generation to 29%. Roughly 22% of PJM’s installed capacity comprising “the most-efficient, dispatchable gas-fired generation” would also be forced to “undertake expensive control options or significantly reduce operations under the proposed rule,” according to the grid operator.
SPP also warned that the ongoing retirement of thermal generators is straining its system. Almost 2.9 GW of thermal generation in SPP retired between 2019 and 2022, coinciding with an increase of 257 system alert hours in 2022 – almost 11 days – compared to 2019. The grid operator says that if its historical gross load were to increase by just 3%, the region would have “no margin for additional retirements,”. Increases in demand are expected with electrification, meaning this is a tangible risk the grid is facing.
ISO-NE quantified this effect in its own region, using Energy Exemplar’s PLEXOS power market simulation platform to analyse the impact of Rule 111 by 2032. The model assumed “significant increases” in power demand from vehicle and heating electrification. The modelling showed that annual generation from larger gas-fired units would decline by 19%, while smaller turbines would see a 119% increase in operation. In other words, Rule 111 would not reduce fossil generation; instead it would shift the generation burden from larger, more efficient gas plant, to smaller, less efficient gas and oil-fired generators.
It also found that periods of high prices (US$ 1,500 /MWh or above) that stimulate demand reduction by consumers would increase significantly from 4 GWh per year to 37 GWh. These types of demand reductions are required when they system is running out of dispatchable resources.
The Joint ISOs/RTOs are also concerned that Rule 111 will deter investment in maintaining existing power plants, further threatening reliability:
“The ISOs/RTOs are already seeing retirement of generators that are concerning as they appear to be driven by a reluctance of investors to make the commitments needed to keep these capital-intensive resources operating… With continued and potentially accelerated retirements of dispatchable generation, supply of these reliability attributes will dwindle to concerning levels… As a result, the Proposed Rule can have negative impacts on electric grid reliability even before the effective date of this rule.”
Elsewhere in their filing they describe the Rule as having a “chilling impact” on maintenance capex in the existing generation fleet, since those investments are in part based on expected future revenues which are threatened by the Rule. Investors may determine that early retirement is more cost-effective.
The Joint ISOs/RTOs criticised several assumptions made by the EPA, including overstating the “commercial viability of CCS [carbon capture sequestration] and hydrogen co-firing” and ignoring “the cost and practicalities of developing new supporting infrastructure within the time frames projected.” They say that without firm proof of the commercial and operational viability of these technologies, placing reliance on them would be a risk: “hope is not an acceptable strategy”.
A key area of concern relates to the fact that the EPA failed to conduct a reliability analysis of the impact of the proposed Rule. Minnesota based think tank, American Experiment carried out its own analysis and found that in no year modelled (2028, 2030, 2035,2040, 2045, 2050, and 2055) did the EPA ensure enough reliable capacity for MISOs grid to maintain reliability. For 2040 the model indicated that several 15-hour blackouts peaking at over 26,000 MW – the size of Minnesota and Wisconsin combined – could occur.
The Joint ISOs/RTOs recommend that Rule 111 is not adopted. They also recommended several changes they would make to the Rule were it to go ahead, including:
Exempting existing facilities that are necessary for reliability from the Rule;A process to monitor and adjust the Rule’s compliance based on progress in delivering the infrastructure needed to accommodate EPAs proposed changes to the grid;Regional or national allowance trading; andGreater clarification as to when a unit can run for reliability reasons.
“EPA’s proposal is the wrong plan at a critical time for our nation’s energy future. It is unrealistic, unachievable, and will reduce key generating resources just as Americans are increasing their reliance on electricity. The energy future outlined by the EPA will result in more blackouts, higher costs, and greater uncertainty for Americans…And it will magnify today’s reliability challenges with grave consequences for an already stressed electric grid. When you find yourself in a hole, the first step is to stop digging. The EPA needs to put down their shovel,”– Jim Matheson, the CEO of the National Rural Electric Cooperative Association
The National Rural Electric Cooperative Association (“NRECA”) a trade group that represents almost 900 local electric cooperatives across 56% of the country has also criticised the proposals calling them “unrealistic and unachievable.”
Consumers get a bad deal as prices rise just when reliability falls
North American power grids are struggling. Year after year, the NERC is warning that an over-reliance on wind and solar power is threatening security of supply during hot weather when demand peaks due to air conditioning use. In the US, there are more deaths due to heat than any other natural disaster according to USAFacts, and the number is growing, from 485 in 2000 to 1,714 in 2022. Yet during heatwaves when conditions are at their most dangerous, gird operators are forced to beg consumers to turn down their ac and other sources of demand to avoid electricity shortfalls. Summer blackouts have already occurred in several states in recent years, and have been only narrowly avoided elsewhere.
At the same time as grid reliability is falling and blackout risks are rising, subsidies for renewable energy more than doubled between 2016 and 2022, according to data from the Energy Information Administration’s Federal Financial Interventions and Subsidies in Energy report. Renewable subsidies rose to US$ 15.6 billion in fiscal year 2022 from US$ 7.4 billion in 2016. Most of those subsidies took the form of tax incentives, with solar applications making up the largest share of the subsidies, overtaking biofuels which was the largest beneficiary of tax incentives in 2016.
Despite these rising subsidy costs, Americans still pay some of the lowest electricity prices in the developed world, ironically due in large part to its access to cheap domestic shale gas. However domestic electricity prices have outstripped inflation in recent years, rising 12% between 2019 and 2022. The country has not been immune to the leap in energy prices following the invasion of Ukraine, the pandemic, and the impact of climate policies. Energy-related household debt is growing, with almost 20 million households thought to be behind on their bills.
Time and again policy-makers neglect market realities in favour of wishful thinking. However much you might want wind and solar to replace coal and gas, even if you deploy a significant over-build, it still will require energy storage, and probably nuclear power as well (which I will be covering in the next post in this series) before you can safely retreat from fossil fuels. This will be expensive, and while consumers may be willing to pay more for cleaner energy, they will find it harder to forgive if that energy is unreliable, particularly if their lives are put at risk as a result. It’s no use trying to prevent deaths from climate change if the measures taken to prevent climate change deaths lead to deaths from excess heat (or cold) because of poor grid reliability.
The Environmental Protection Agency needs to pay attention: America’s grid operators and energy regulators are not wrong. Prematurely closing fossil fuel generation is already putting people at risk – the very last thing they need now is new regulation that will magnify the problem.
Source: Watts Logic
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