The nation’s utility watchdog issued a major new rule this week that underscores the need for fossil fuels to keep the lights on, especially as more solar and wind are added to the grid, say utility representatives.
The Federal Energy Regulatory Commission finalized regulations Thursday that would ensure that power plants fueled by fossil fuels such as coal and natural gas are compensated in the large interstate markets the commission oversees.
“The new pricing approach is particularly important as the nation’s resource mix continues to change dramatically,” said John Shelk, president of the Electric Power Supply Association that represents some of the largest merchant power companies in the country.
Shelk said that with more renewables coming onto the grid, there is an increasing need for non-renewable and other resources to back them up when their electricity output suddenly drops. Renewables like solar and wind produce electricity only when the wind is blowing and the sun is shining.
The new rules would help ensure the proper mix exists to ensure grid reliability as more renewables enter the market, he said.
“Greater intermittent resources such as wind and solar require other resources to quickly respond to dispatch signals and do so flexibly to maintain reliability,” Shelk said. The final rule “will increase transparency and compensate resources more appropriately.”
Shelk said an interview that the rule would help more effectively compensate natural gas power plants when “solar drops like a rock and you need something to come back very quickly” to make up for the power loss.
He said the situation developing in California, where it is becoming more heavily dependent on solar power, has forced the commission to find market fixes that better compensate fossil resources to come online quickly when solar and wind aren’t available.
The Federal Energy Regulatory Commission says the final rule addresses specific market failures identified by the commission in 2015, which include the inability to properly compensate electric producers when there is a sudden reduction in electricity production. Sudden reductions can result from solar and wind resources that ebb and flow.
One of the specific things the rule does is to trigger the use of “shortage pricing,” which compensates an electric producer when thee are power shortages.
The White House held a summit Thursday on increasing the amount of battery storage on the grid to compensate for intermittent solar and wind energy. The administration has typically focused on subsidies and strict environmental regulations when addressing renewables, and less on the electric markets that have to absorb them, according to critics.
For example, the commission had to press the Environmental Protection Agency to include a reliability safety measure in its landmark climate rules to ensure that compliance with the rules would not hurt the function of the grid. EPA did listen to the commission and included the safety valve in the final version of the rules.
Thursday’s White House summit, called “Scaling Renewable Energy and Energy Storage with Smart Markets,” sought to address some of the market issues affecting renewables.
Supporters of the White House effort were quick to point out that deploying more big batteries and storage on the grid is less of a technology problem than it is a market issue.
“As the United States continues to modernize the electric grid, energy storage systems will play an increasingly vital role in our energy future,” said Matt Roberts, the executive director of the Energy Storage Association. “However, today there are significant market barriers that prevent deployment of energy storage systems and the continuous improvement of our national grid infrastructure.”
FERC has been engaging in recent months with utilities and others to find ways of including more storage on the grid.
