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Power grid operators say they can meet customers' energy needs

030918 FERC Grid Resilience Comments
The nation's federally overseen grid operators, which run about 70 percent of the U.S. power supply, faced a Friday deadline to report to the Federal Energy Regulatory Commission on the state of the electricity system's resilience. (AP Photo/Mark Duncan, file)

Regional grid operators mostly expressed confidence Friday that they could overcome reliability challenges to the electricity system, as energy generation transitions away from around-the-clock coal and nuclear to natural gas and renewables.

The nation’s federally overseen grid operators, which run about 70 percent of the U.S. power supply, faced a Friday deadline to report to the Federal Energy Regulatory Commission on the state of the electricity system’s resilience, or its ability to bounce back from a major disruption such as this year’s bomb cyclone in the Northeast.

In a highly anticipated decision, FERC in January voted unanimously to reject a proposal from Energy Secretary Rick Perry to provide special payments to struggling coal and nuclear plants in the name of resilience and reliability.

FERC, in rejecting Perry’s plan, directed regional transmission operators to submit information on resilience challenges in their markets. The commission described resilience in its order as “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.”

The Midcontinent Independent System Operator, which runs the bulk of the Midwest power grid, said in its comments to FERC that its market does "not have any imminent or immediate resilience concerns."

The operator, whose market heavily uses coal, doesn't specifically identify coal, nuclear, or other plant retirements as a concern.

Similarly, the New York Independent System Operator said it is confident in its ability to efficiently and reliably meet New York’s energy needs.

“The NYISO remains confident in the ability to work collaboratively with its stakeholders to develop and implement the necessary market and procedural enhancements to continue to efficiently and reliably serve New York’s energy needs,” it said in its filing.

The grid operator for New England, however, outlined significant problems in its market, although it did not ask FERC to take a specific action.

New England, representing six states, has electricity costs that are more than double the national average. It is heavily dependent on natural gas, as financially struggling coal and nuclear plants have closed.

But New England struggles to import enough natural gas to be used at generating facilities, especially during the winter because of a lack of sufficient pipeline infrastructure.

The region was forced to burn oil for electricity during January’s deep freeze, known as the “bomb cyclone,” using about 2 million barrels. That’s more than twice the oil burned in all of 2016, according to ISO New England, the operator that runs the region’s power grid.

“In New England, the most significant resilience challenge is fuel security — or the assurance that power plants will have or be able to obtain the fuel they need to run, particularly in winter — especially against the backdrop of coal, oil, and nuclear unit retirements, constrained fuel infrastructure, and the difficulty in permitting and operating dual-fuel generating capability,” the grid operator said Friday in its comments to FERC.

PJM Interconnection, covering 13 states from Illinois to the District of Columbia, was the only operator, in comments reviewed by the Washington Examiner, to recommend specific actions.

PJM officials have previously said that the biggest challenge facing FERC is changing how power providers are compensated as the grid transitions, rewarding sources that can provide reliable and resilient service.

PJM prefers a different approach than what Perry proposed. It would be market-neutral, in which all power sources, not just coal and nuclear, could receive enhanced payments.

It has proposed a solution that would allow plants to set their own prices.

In its comments to FERC, PJM asks the commission to permit "cost-based compensation" for plants in emergency situations where there isn't an existing payment mechanism.

Under the current compensation system, operators of wholesale power markets hold auctions where electricity generators make bids, with the goal of matching supply to demand at the lowest price for consumers. Coal and nuclear plants are increasingly uncompetitive because they struggle to keep costs low and make a profit.

About 20,000 megawatts of coal have recently retired in PJM, and about 4,000 megawatts of coal could retire in the next few years.

As FERC takes time to absorb the comments, commissioners have hinted they may take some type of action to better value resilience, based on what grid operators report.

A day after FERC Chairman Kevin McIntyre said he would be “very surprised” if the commission takes no action, fellow Commissioner Robert Powelson suggested the same.

Powelson said Thursday he expected the regional grid operators to present different feedback, depending on their market characteristics.

“Some regions will come back and say, check the box, we are good on resilience and reliability and let us go about our business,” Powelson said during an appearance at the CERAWeek energy conference in Houston. “Others may come back with valuing attributes of resources within that market, and we will seriously look at that.”