Pacific Northwest looks to avoid California-style blackouts through more regional coordination
The blackouts rolling across California this month are the first of their kind for that state since 2001, when a drought that severely reduced production from hydroelectric plants in the Pacific Northwest was one of several factors that triggered the Western electricity crisis.
Although the impacts of that crisis in California are the most widely-known, the Pacific Northwest was on its way toward a similar scenario, with the probability of a "loss of load" event on the rise due to a lack of investment in new power generation through the 1990s, according to the Northwest Power and Conservation Council's retrospective analysis of the crisis.
Now, nearly 20 years later, it's déjà vu for the West Coast. Although, once again, California is the first to experience rolling blackouts, its neighbors to the north could be next.
The risk of a blackout due to insufficient power resources to cover load is high enough in the Northwest — made up of Washington, Oregon, Idaho, Utah, most of Montana and western Wyoming — that one can expect such a blackout happening nearly three days out of ten years. That estimate is well above a commonly-used industry benchmark of one day out of ten years, according to a 2019 study completed for several utilities in the region by consulting firm Energy and Environmental Economics, Inc. The study forecasts that, barring changes, the risk is going to get worse due to the retirements of more large coal-fired plants over the next decade.
In terms of the risk of experiencing a loss of electric load scenario as recently seen in California, the Pacific Northwest is "already there," Arne Olson, senior partner at Energy and Environmental Economics said.
A difference between the past crisis, however, is that northwestern utilities are moving toward a formal program for sharing their resources that would be brand new for the region.
The Northwest Power Pool (NWPP), a voluntary association of utilities in the Pacific Northwest, recently announced that it has hired the Southwest Power Pool (SPP), the central grid and wholesale market manager for Great Plains states like Oklahoma, Kansas and Nebraska, to design a resource adequacy program for the association. Members of NWPP include Avista, BC Hydro, the Bonneville Power Administration, Idaho Power, NorthWestern Energy, PacifiCorp and Puget Sound Energy.
This move to a more formal system of sharing capacity across the region, clean energy advocates hope, will squash the threat of power shortages while allowing Northwest states to adhere to their, in some cases, aggressive goals for emissions reductions.
The resource adequacy program is "an opportunity to evaluate capacity needs and pool resources on a regional basis," potentially leading to "huge benefits to our goals of decarbonization," Nicole Hughes, executive director of Renewable Northwest, a renewable energy advocacy group, said.
The program would also set an example of a regulatory model that moves toward greater regional coordination while retaining the Pacific Northwest's historical focus on the vertically-integrated utility model. The Pacific Northwest has thus far held out from forming or joining a regional transmission organization (RTO) or independent system operator that can act as a central authority.
Alongside recent efforts to create an energy imbalance market in the generally vertically-integrated Southeast, the Northwest's move toward a formal resource adequacy program shows there is demand for a "third way" between the binaries of, on one hand, sticking with vertically-integrated utilities, and, on the other, adopting a complex regional body, according to Wilkinson Barker Knauer partner Matthew Larson. "They're trying to capture the benefits of working together without taking the administrative plunge of a full-on RTO," he said.
New tools needed for the job
The Pacific Northwest's bounty of hydroelectric resources has long been one of its greatest energy advantages. "The Northwest was capacity-rich for many, many years," NWPP President Frank Afranji said.
A confluence of factors, however, has been drying up that surplus. Climate change is shifting the production patterns of hydroelectric plants — rainfall is heavier in the fall and winter, but snowfall is lighter, lowering spring's snowmelt and reducing summer hydroelectric production. At the same time, summers are getting hotter, driving up air conditioning use, so hydro-production is on average decreasing at the times electricity demand is rising.
A booming population in states including Washington and Idaho is also boosting demand on the system. In addition, 3,500 MW of coal-fired power in the Northwest Power Pool region has retired in just the last two to three years, with only around 1,200 MW of new capacity, primarily solar, wind and natural gas, coming online to replace the retired capacity, according to the Northwest Power and Conservation Council's most recent power supply adequacy assessment.
"Load growth, production of renewables, closure of coal plants — [with] all of those factors combined, we are going to be moving toward a capacity-deficit situation," Afranji said.
What's more, the tools that the region has used to prevent shortages in the past may not work as well this time. The culprit for the long-term capacity deficit projected around the time of the California electricity crisis was a lack of new power plants built in the 1990s due to a "naive faith" that "the invisible hand of the competitive market would take care of long-term supply," the Northwest Power and Conservation Council found in its retrospective analysis.
State regulators, however, responded and required utilities to do more long-term planning through integrated resource plans, which led to the construction of new power resources like large combined-cycle natural gas-fired plants, narrowing the projected load-resource deficit over the next 20 years, John Fazio, the Council's senior power systems analyst, said.
The problems, now, however are bigger than what individual state regulatory bodies or utilities can tackle on their own. Washington and Oregon are requiring deep cuts in CO2 emissions, making the construction of more natural gas plants uncertain. Instead, utilities in the region are expected to increasingly rely on wind, solar, battery storage, energy efficiency and demand response.
But NWPP, renewable energy advocates, economic studies of the region's resource adequacy and others all agree that tapping the full value of those resources will require more sharing of power across the region in order to compensate for the intermittency of renewable energy. The Northwest needs "a way to quantify how much sharing makes sense to do and how much sharing is happening," Olson said. "Right now it's every man for himself."
For example, if an Oregon utility needs to access power capacity to compensate for low solar and wind power production, that utility would need to either go into the market and buy power at the prevailing price, or strike a bilateral contract with another utility.
NWPP "wants to make those kinds of transactions easier to occur instead of having 17 or 18 utilities scrambling to provide solutions to problems," Fazio said.
Starting July 31, NWPP began trying out what Afranji described as a "simplified" and "interim" version of what will eventually be the resource adequacy program. It provides a standardized process for participating utilities to share capacity — a utility can indicate that it expects to be short on capacity at a certain time, and NWPP coordinates with other participants to provide that capacity at pricing based on a pre-approved market index.
Despite its newness, the program has already made a difference, according to NWPP. As California experienced rolling blackouts in mid-August, a NWPP utility was expecting that it may experience power shortages., but through the program, several other utilities came to its aid, Afranji said.
"This past week was a clear indication for the need for such a program," Afranji added.
This "stopgap" program is, for now, voluntary — the participating utilities are under no obligation to share capacity. But as NWPP works with SPP, the final resource adequacy program may make participants subject to penalties if they do not fulfill their capacity obligations, a feature found in SPP's own resource adequacy program.
What remains an open question is whether the program will be a first step toward more formal, centralized rules for the Pacific Northwest that will make the region more resemble other parts of the country with competitive wholesale markets.
Renewable Northwest's Hughes argues that NWPP's resource adequacy efforts should eventually lead to the formation of an RTO because doing so would help the region overcome transaction costs like transmission congestion that diminish incentives to share capacity. "There is one more level of efficiency that would come if we had an RTO in place," she said.
If the western U.S. continues without a coordinated wholesale market, near-term state decarbonization goals are "achievable" but at the cost of increased CO2 emissions and $1 billion per year in higher operating costs, according to a 2019 study completed by Energy Strategies, LLC for the Western Interstate Energy Board. In addition, a wholesale market would reduce the curtailment of renewable energy — when wind or solar facilities must purposefully cut their energy production — by 8% compared to the scenario without such a market, because the market would allow for more efficient trading of that excess energy, the study found.
But the NWPP resource adequacy effort could also show that vertically-integrated utilities can add a layer of formal coordination without the need for a full-on RTO, according to Larson. For example, adding an RTO may not solve the transmission congestion problem because it does not make the thorny process of siting and acquiring land rights any easier, he said. The program is part of a larger "push for new ideas and new ways to think about emergent markets," Larson said.
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