The following is a contributed article by Brian Evans-Mongeon, President and CEO, Utility Services, Dan Kopin, Compliance Analyst, Utility Services and Lon Huber, Director, Navigant.
Concurrent trends of digitization, decentralization and decarbonization are accelerating across the electric power system.
From generation to transmission to distribution, these trends present opportunities for the electric industry, state policymakers and regulators to increase dynamic control capabilities, maximize network-level efficiencies and promote environmental benefits. But challenges are emerging as well.
With an increasingly digitalized, decentralized and decarbonized power system, there are new vectors of interference and operational challenges. To maintain reliable operation of the bulk power system under these trends, power system diversification will be of paramount importance.
According to Investopedia, diversification is "a risk management strategy that mixes a wide variety of investments within a portfolio," which "strives to smooth out unsystematic risk events in a portfolio, so the positive performance of some investments neutralizes the negative performance of others."
In the context of the power system, ratepayer and investor-backed resources represent a portfolio of investments.
All power system resources face individual risks. Just as in the investment context, however, a diversified power system portfolio mitigates overall risk.
Determining the optimal portfolio in each region requires consideration beyond system topology and environmental factors. Each region would benefit from a probabilistic assessment of scenarios that might limit both resources and the supply of fuel to determine the right balance.
Learning from the Midwestern experience
Recent events within the Midcontinent Independent System Operator (MISO) region highlight the critical role of diversification in our power system resource mix. In January 2018, below-average temperatures in the south central region of the United States (see Figure 1) resulted in 14,000 MW of unplanned generation outages, derates, or failures to start.
As shown in Figure 2, 74% of generation outages and derates were natural gas units and 19% were coal-fired units. Wind generation in MISO, meanwhile, reached its then-record peak of 15,038 MW.
In January 2019, a polar vortex brought another extreme cold-weather event to the Midwest. When temperatures dropped over the course of a day from -8°F to -21 °F, wind turbines reached mechanical limitations and automatically shut down at -20° F.
Wind energy had been powering nearly 50% of the area's total electric demand. After the extreme weather event, wind energy output fell from 11,445 MW to 550 MW, accounting for only 2.5% of the region's electric supply.
All power system resources face unique risks. A diversified portfolio of resources and adequate power transfers between regions allowed MISO to maintain reliable operation through these events.
Still, according to Federal Energy Regulatory Commission (FERC) and North American Electric Reliability Corporation (NERC) staff, "cold-weather events continue to occur involving extensive unplanned generation outages, which imperil reliable [Bulk Electric System] operations."
In 2019, significant outages due to weather events have demonstrated the power system's overall vulnerability.
In June, 44 million people were left without power in Argentina, Uruguay and parts of Chile because of extreme rains. Although far less impactful, hundreds of thousands of people from Michigan to New York were affected by outages due to a heat wave and historical storms in July.
With a weather-dependent resource mix, the impacts of these events may be even more pronounced. If energy portfolios are poorly balanced, then even natural and contained weather variability may impact supply, as witnessed in Germany.
As every region is unique, optimally diversified power systems will differ across the country. Regional coordination to promote diversification will be essential as state policymakers and regulators pursue policies of digitization, decentralization and decarbonization.
Fortunately, there are obvious partners for states — balancing authorities. Entrusted by FERC to balance supply and demand on the grid in real time, entities like ISO New England, MISO and PJM are broadcasting how weather-dependent inverter-based resources can play a bigger role in a diversified power system by supporting its reliable operation.
New York Public Service Commission has opened a proceeding to align its resource adequacy and clean energy goals. Alignment of reliability and environmental goals ensures that efforts to promote clean energy are not contrary to bulk power system requirements.
States can also work to ensure that economic signals reflect reliability impacts and benefits of capacity to the system by location and time, as in New York. Alternative economic mechanisms, like subscription tariffs, can help states balance supply and demand on distribution utility systems in real time in support of reliability.
States can also support efforts to improve weather forecasting and modeling, as the California Public Utility Commission has done with Effective Load Carrying Capacity, a type of probabilistic modeling that yields a percentage expressing how well a resource is able to meet reliability conditions and reduce expected reliability problems or outage events.
Atypical weather patterns and operating limits due to conditions like extreme wind or cold will only emphasize the need for improved forecasting.
States may also consider expanding renewable portfolio standards into emissions-based standards. Such a standard would allow not only lower costs but also flexibility, fuel switching and portfolio optimization to reach the desired outcome of a diversified power system portfolio. Other policies like Clean Energy Standards that include all carbon-free resources in portfolio quotas, instead of solely renewables generation, may also reduce costs compared to overly prescriptive polices.
Finally, Clean Peak Standards offer another opportunity for states to promote diverse resources capable of limiting emissions and providing essential reliability services to the bulk power system. Massachusetts is targeting such benefits with these standards, that align procurement of clean energy to hours when its marginal benefits are the greatest. Higher multipliers are applied to credit value for production during scarcity events and at peaks.
Clean Peak Standards offer states far more expansive tools than what are included in the typical renewable portfolio standard: clean peak resources may be on-peak renewable production, nuclear (in the case of Arizona), energy storage (charged by eligible resources) and demand management (measures based on savings).
New reliability challenges ahead
Whatever course of action states decide upon, policymakers and regulators should be aware that the North American Electric Reliability Corporation (NERC) is developing "positions on emerging technologies and the over-arching effect of these technologies on reliability standards."
These technologies are not just on the bulk power system (BPS), NERC explains:
As emerging technologies that are interconnected at scale continue to provide challenges and uncertainties to BPS reliability, standards alignment with the effects of these technologies are critical. This includes battery storage, distributed energy resources (DER), the proliferation of electric vehicles, cyber implications on system design, operations, and restoration, and systemic risks from interdependencies among gas, electric, and communications systems.
NERC's System Planning Impacts from DER (SPIDER) Working Group is writing reliability guidelines on modeling, studying and verifying the impact of weather-dependent DER aggregations on the bulk power system. A determination that weather-dependent and inverter-based DER — interconnected at any voltage — adversely impact the reliable operation of the bulk power system may lead to new standards.
Planning renewable integration itself will be key to meeting these standards, supported by adequate co-optimization and probabilistic approaches. And, of course, NERC's reliability standards preempt state regulations and policies.
If states do not align policies of digitization, decentralization and decarbonization with a fourth dimension of diversification, industry may need to take unprecedented action. Alternatively, with diversification as a check and balance on existing trends, states can meet clean energy goals and support the bulk power system's reliable operation.