Beyond fuel security: Reliability, resilience and a more sustainable future through grid flexibility
Why the focus on fuel security when improving grid flexibility could achieve the aims of fuel security more cost effectively while modernizing and decarbonizing our grid?
The following is a viewpoint from Jennie Chen, senior counsel of federal energy policy and Kate Konschnik, director of the Climate and Energy Program at Duke University's Nicholas Institute for Environmental Policy Solutions.
The White House, federal agencies and some regional grid operators are seeking to boost electric grid reliability and resilience.
While the latest proposal from the Department of Energy (DOE) to bail out uneconomic coal and nuclear plants in the name of resilience has apparently stalled at the White House, this does not mean the end of some actors focusing on "fuel security" or "fuel assurance" as the key to grid reliability and resilience. In fact, the shelving of the DOE plan puts more pressure on federally regulated grid operators to move forward with developing market mechanisms to compensate for fuel security.
Reliability includes the ability to withstand shocks to the electric systems, from storms to cyber attacks to keep the lights on. It is a well-developed concept with a framework of definitions and metrics.
Resilience of the bulk power system is less-developed, but speaks to the grid's ability to anticipate, ride-through, and bounce back after disruption. The two are thus not mutually exclusive when it comes to the transmission system.
Spotlight on resilience
The resilience of the distribution system is not a new concept for utilities serving end-use customers. In contrast, the recent spotlight on "resilience" in the federally regulated sphere arises from increasingly intense weather and concerns about malicious attacks on power plants, gas pipelines and transmission infrastructure.
Separately, falling demand, newer resources and lower gas prices are driving the retirement of coal and nuclear generation that transmission grid operators have long relied on.
Concerned about these trends, DOE conducted a grid resilience study in 2017.
The study did not find that the fleet transition threatens grid resilience or reliability or recommend improving fuel security (other than to mitigate mismatches between how gas and electricity are traded). Nevertheless, DOE submitted a proposal for the Federal Energy Regulatory Commission (FERC) to help keep uneconomic power plants from retiring by compensating them for keeping 90 days' worth of fuel onsite.
FERC rejected the proposal, but solicited input from grid operators and other stakeholders on the meaning of bulk grid resilience, how it should be differentiated from reliability and whether any FERC action is needed.
While FERC has not yet taken further action, a leaked memo suggested that DOE may invoke emergency, national defense powers to pay baseload coal and nuclear units in the tens of billions of dollars per year, even when they are not cost-competitive in the wholesale electricity markets. Anonymous information from White House insiders now indicates that the memo's proposals are too mired in internal controversy to be viable.
More pressure on grid operators
This recent shelving of the bailout may put more pressure on regional grid operators and FERC.
The New England Independent System Operator (ISO-NE) and PJM Interconnection (the grid operator for the Mid-Atlantic and parts of the Midwest) have expressed concerns about future resilience in light of their increasing dependence on natural gas, especially if storms or attacks reduce natural gas supplies.
ISO-NE conducted a fuel security study, which has been controversial, and filed at FERC a fuel security retention proposal to keep particular power plants from retiring. PJM is conducting a fuel security study and seeks to further compensate power plants by pricing fuel security into its capacity market.
New York's grid operator is also planning to undertake a fuel and energy security study. Finally, the North American Electric Reliability Corporation is planning to release a related study this November.
The focus on fuel security, whether via out-of-market or market-based means, to improve resilience confines grid operators to traditional tools without having demonstrated the rationale for such a focus over other actions that could yield more results for the money.
Moreover, a reliance on traditional "fuel-secure" resources to ensure grid resilience ignores fuel-free resources like wind power and demand-side resources that have significantly contributed to keeping the lights on during stressful grid events, when onsite coal piles froze or became too wet to be of use. Similarly, nuclear plants had to be taken offline or ramped down during hurricanes as recent as Florence and Michael to comply with safety protocols.
The focus on onsite fuel also ignores the biggest historical causes of power outages: vulnerabilities in our transmission and distribution infrastructure. When lines are down or substations are flooded, no amount of fuel security can help.
Boosting grid flexibility
In contrast, distributed generation, energy storage, micro-grids and self-healing grid technology can help manage reliability and resilience issues, and isolate grid threats to keep them from affecting other parts of the system. These resources can also boost grid flexibility.
According to DOE, flexibility is the capability of the power system to maintain balance between generation and load under uncertainty. Improving grid flexibility thus achieves the ends sought by fuel security.
But flexibility does more, by enabling a broader range of resources to compete to provide resilience-related services, including fast-starting technologies that can be more cost-effective in balancing supply and demand in the face of uncertainty. Improving flexibility also prepares our grid for a low-emissions future by employing technologies capable of smoothing out variability in renewable generation, while enabling customers to better control their electricity usage and save money.
In contrast, fuel security measures could lock in the grid of the past by crowding out new investment by maintaining older, less efficient power plants.
Moreover, fuel security measures rewarding baseload power plants that cannot be quickly turned on and ramped by grid operators or power plants that have firm, must-take fuel supply contracts would reduce grid flexibility.