FERC's resilience order may suggest reliability tweaks, rather than novel solutions
Determining whether resilience is a stand-alone concept or just a component of reliability has real world implications.
The following is a Viewpoint by Kate Konschnik and Brian Murray.
The Federal Energy Regulatory Commission has asked stakeholders to identify risks to grid resilience and propose solutions. Stakeholders may be tempted to frame resilience as a brand new problem requiring new market and regulatory responses. But could pre-existing reliability mechanisms get us most of the way there?
In a January 8 order, the Federal Energy Regulatory Commission soundly rejected the notion that, to keep the lights on in regions served by bulk power markets, it was necessary to compensate power plants capable of housing 3-month fuel stores. In closing the docket directed by the Department of Energy’s Notice of Proposed Rulemaking (NOPR), however, FERC opened a “national conversation” about grid resilience. Regional Transmission Organizations (RTOs) have 60 days to respond to questions posed by FERC, followed by 30 days of “reply” comments from other stakeholders.
This docket seems to suggest, at first blush, that system operators should pursue resilience as its own novel concept.
In the new proceeding, FERC proposed that resilience means the “ability to withstand and reduce the magnitude and/or duration of disruptive events, which includes the capability to anticipate, absorb, adapt to, and/or rapidly recover from such an event.”
Resilience is a term commonly used in climate adaptation discussions to describe the ability of a community, industry, or ecosystem to adapt to changing temperatures, precipitation patterns, extreme weather events and sea level rise.The concept has deep roots in multiple disciplines. In engineering, resilience is — as FERC proposes — the capacity of a steady-state system to return to equilibrium after a disturbance. Another more dynamic definition — what some scholars call ecological resilience — references how much outside force a system can take before it changes structure and begins to follow a different, stable set of rules. Drawing on both concepts, economic resilience describes the capacity of an economy to recover or recreate itself after a shock, in ways that mitigate aggregate losses and negative distributional impacts.
Given rising threats of a diverse range of unplanned traumas (ranging from extreme weather events to cyber attacks), it may be that resilience “[i]s an important issue that warrants further attention.” But before rushing headlong into characterizing resilience as a new problem for the grid and suggesting novel solutions, it is worth asking how well-defined concepts and long-standing grid management tools and standards can help address the challenge.
A distinct concept?
Is resilience a stand-alone concept or just a component of the well-recognized concept of reliability? This is a foundational question.
As one digs beneath the surface, FERC seems still to be seeking clarity on the relationship between resilience and reliability. Of the 24 questions FERC has asked the RTOs to address in their comments, several relate to the adequacy of existing market-based mechanisms and reliability standards to achieve resilience. In addition, FERC describes the times it has “taken action to address reliability and other issues with regard to the bulk power system that have helped with the bulk power system’s resilience, even though we may not have used that particular term.”
In her concurring opinion, Commissioner Cheryl LaFleur takes direct aim at this issue, asserting that resilience “is unquestionably an element of reliability” and has “already informed much of the Commission’s work on both market rules and reliability standards.” Last October, as the FERC wrestled with the DOE’s NOPR, its staff issued 30 questions for public comment — and began by asking for a definition of resilience and an explanation of “how it is different from reliability.” The FERC order has offered a definition; but the distinction from reliability remains unaddressed and critical to tackle.
Even DOE’s initial NOPR proposed payments for “eligible reliability and [emphasis added] resilience resources,”conflating the attributes ostensibly served by onsite fuel.
Real world implications
Viewing resilience as either a stand-alone concept or a component of reliability has real world implications. A new concept begs its own novel mechanisms and market interventions. Resiliency as an issue embedded in reliability might be managed (and is at least in part already managed) through existing market rules and reliability standards.
So, rather than give coal and nuclear power plant operators out-of-market payments to maintain their economic viability — an extraordinary proposal given that independent analysis suggests they are not critical for reliability — a policy aimed at resilience might instead revisit reliability standards. Stakeholders could examine price formation or contingency planning to ensure the entire system is viable and resilient — that the generation, transmission, distribution and balancing mechanisms may meet dynamic load conditions in real time.
As FERC’s order acknowledged, given the powerful market and policy drivers transforming the electricity sector, “the Commission’s markets, transmission planning rules, and reliability standards should evolve as needed to address the bulk power system’s continued reliability and resilience.” But stakeholders might consider tweaks to the existing approach, rather than a new regime cut from whole cloth.
Maintaining a reliable grid
A number of mechanisms currently exist to maintain a reliable grid within FERC’s jurisdiction. As FERC notes, states and utilities need to make sure they have similar systems in place outside of the RTOs, and on the distribution grid.
The mechanisms at FERC’s disposal include reliability standards crafted by the North American Electric Reliability Corporation, the ancillary services market that compensates resources for their value to the transmission system; scarcity pricing, which can signal when, where and what type of generation attributes are needed in the market; and N-1 planning criteria, which require utilities and RTOs to identify and plan responses to the greatest single contingency on their system — from a gas pipeline or transmission line shutdown to a forced outage of the largest generator. As FERC Chair Kevin McIntyre testified Jan. 23, changes made to several of these mechanisms since the 2014 Polar Vortex made the grid more resilient in the face of extreme temperatures in much of the United States December 23-January 5.
Does this mean we have a foolproof system? No. Do these mechanisms need to adapt to changing circumstances? Absolutely. The question is whether we are chasing resilience as a new concept, in need of its own separate set of solutions instead of folding it into the broader endeavor to deliver reliability.
For more than two decades, “in regions with organized markets, the Commission has largely adopted a pro-market regulatory model,” relying on competition and market rules to determine prices for energy, capacity and ancillary services. This market-based approach has helped maintain reliability.
Using market mechanisms to enhance resilience is a policy choice; complying with the requirements of the Federal Power Act (FPA) is not. Whichever way FERC addresses resilience or reliability, the FPA requires it to do so in a manner that gives rise to just and reasonable rates — rates neither unduly discriminatory nor preferential. A well-functioning market that clearly defines and values the attributes needed for grid reliability and resilience — in a fuel-neutral, technology-neutral fashion — will comply with the law and support both concepts.
Kate Konschnik is the director of the Climate and Energy Program at Duke University’s Nicholas Institute for Environmental Policy Solutions and Brian Murray is director of the Duke University Energy Initiative.