Energy Security

Eight Critical Reliability Challenges NERC Is Confronting for Grid Stability

The “hypercomplex” risk environment in which the North American power sector operates is underscoring the urgency for strategic initiatives to enhance grid reliability and security across North America, the head of the North American Electric Reliability Corp. (NERC) told reporters on April 4.

NERC CEO Jim Robb, in a briefing, said the hypercomplex risk environment facing the electric grid is “driven by a combination of things: extreme weather, the transformation of the resource base—with now a bunch of issues created around the growth outlook for the sector due to industrial or re-industrialization, and the repatriation of some industries.” The “extraordinary expansion” of new load, particularly from artificial intelligence and data centers, as well as electric vehicles and building electrification are also “starting to show some impact on the growth outlook,” he said. “We’re working quite hard to stay ahead of all these issues, but things are coming at us at a very rapid pace from a lot of different directions.”

Following are eight evolving challenges NERC emphasized.

1. A Focus on Inverter-Based Resources

A key concern for NERC has been to encourage the strategic integration of inverter-based resources (IBR), which are “found everywhere across the bulk power system (BPS) in North America and are the most significant driver of grid transformation today,” NERC noted in a December 2023 explainer. Inverter-based resources include modern wind turbines (type 3 and type 4 wind turbines), solar PV, and battery energy storage resources, but also high voltage direct current (HVDC) circuits and flexible alternating current transmission system devices like static synchronous compensators and static volt-ampere reactive compensators. “Both inverter-based resources and synchronous generation can provide essential reliability services to the BPS. However, the industry is facing challenges integrating significant levels of inverter-based resources because of the unique differences between technologies,” NERC explained. “BPS planning, design, protection, and operations practices will all need to evolve to ensure reliability and resilience of the BPS under this rapid pace of change.”

Robb noted NERC has been actively working for several years to address the rapid expansion of inverter-based resources onto the grid. Work is ongoing “to understand how these resources connect to the grid and, importantly, interact with other resources on the grid.”  NERC intends to “develop the standards requirements governing these unique assets,” he said. In response to a directive from the Federal Energy Regulatory Commission (FERC), NERC has also examined the impact of non-bulk electric system (BES) inverter-based resources. The initiative led NERC to launch an initiative last year to expand the registration of those assets. NERC has so far presented a proposal to FERC to expand its registry to cover IBRs of 20 MW or more, connected at 60 kV and above. “We’ll have a very proactive effort to bring new entities into the registry, and they will be subject to a handful of critical standards associated with inverter-based resources,” he said. “Our goal here is by the end of this year to have those that have ever completed and the standards requirements articulated for inverter-based resources and this new class of smaller, smaller IBRs.”

2. Addressing Growing Load and Uncertain Demand from Data Centers and AI

A key wildcard Robb underscored relates to growing load and uncertain demand. Robb pointed out the unprecedented pace at which new, large-scale electric loads are being integrated into the grid, particularly from data centers and electric vehicle charging infrastructure. “We’re seeing an extraordinary expansion of technology… and the grid is seeing significant impacts on growth outlook,” he said. The expansion introduces variability and unpredictability into the grid, complicating demand management and planning, he said.

Data centers and the rapid growth of energy-intensive operations to power artificial intelligence (AI) is a specific concern, he suggested. He highlighted two issues. “First is it exacerbates all the issues around with the resource adequacy trends that we’ve been seeing over the last several years that we’ve been highlighting in our reliability assessments,” he said. “You know, the electric industry hasn’t grown appreciably over the last 10 to 20 years because of all the success we’ve had around energy efficiency and demand response, appliance turnover. The growth rate that we forecasted last year, and peak load growth, versus the changes in the previous 10 years is like twice—2x—what it was. And I anticipate when we publish our next  [LongTerm Reliability Assessment (LTRA)]  in December, we’ll see that up even significantly higher because the the number of utilities that are reporting challenges meeting these very large loads and the speed at which they’re coming onto their systems or attempting to come on to their systems is fairly ubiquitous.”

Robb suggested the BPS is slated to see “a lot of upward pressure on the load forecast.” That will make all the surrounding issues “much more problematic and challenging for the industry to meet because we’re we’re kind of treading water right now in terms of energy supply,” he said. “We’ve got issues with essential reliability services looming on the horizon as we retire traditional spinning mass generation and replace it with the asynchronous inverter base generation.”

Yet another issue that NERC is concerned about concerns how these power-hungry resources could create reliability issues in and of themselves, Robb noted. “I’ll give you an example,” he said. “One of the ones that we’re concerned about is crypto mining, very large loads. One of the crypto industry’s selling points is that they don’t need to run 24/7, the way a data center would. That said, they can follow pricing and so forth and not create economic issues on the grid by kind of ramping their operations up and down.” However, “if you have a lot of these in a common area, and they’re cycling like that, the question is, could they induce oscillations onto the grid and create create instability because of their price following behavior?  I don’t really know the answer to that, but it’s something we’re concerned about.”

Another underlying concern relates to resource ownership. Several emerging large-load facilities could be owned by adversarial nations, he noted. That poses a new security risk given that they could potentially use their loads to “introduce problems onto the grid by the way they manage them,” he said. “So we want to study that issue and figure out if that’s a real problem, from a reliability perspective, or if it would be well attenuated based on where the resources come on the grid. The resource adequacy side of the equation, though, is real and of significant concern,” he said.

To address these challenges, NERC is focusing on enhancing its analytical capabilities to better predict and manage these new demand patterns. That will entail investing in advanced modeling techniques and improving the granularity of demand forecasts to better anticipate and respond to fluctuations caused by new technologies and consumer behaviors, Robb added.

3. Interregional Transfer Capability Assessment

Following a directive from FERC in May 2023, NERC has embarked on an interregional transfer capability study (ITCS). Transfer capability “is a critical measure of the ability to address energy deficiencies by relying on distant resources and is a key component of a reliable and resilient bulk power system,” NERC explains. The study, which must be filed with FERC by Dec. 2, 2024, will analyze the amount of power that can be moved or transferred reliably from one area to another area of the interconnected transmission systems. It will be conducted in consultation with the six regional entities and each transmitting utility in neighboring transmission planning regions. NERC is also planning a second phase of the study (slated for completion by 2025) that will look at interprovincial transfer capability within Canada.

It’s a really important assessment,” Robb noted. “As we kind of continue to change our focus away from capacity and reserve margin towards energy and energy availability, transfer capability and assessing the ability of the transmission system to provide those needed services will become an important part of our annual reliability assessments that we do.” He underscored: “There’s never been one done of the scale that we are looking at, and particularly as we look at changing weather patterns and changing resource base. With this resource base, with renewable generation, obviously, you can’t move the fuel, so you have to move the power. So, transfer capability becomes a very, very important part of the reliability fabric of the sector.”

4. Enhancing Agility in Standards Setting

NERC has also revised its standards-setting process to better respond to urgent issues. Robb said this “real focus on agility” responds to engagement with stakeholders. Last year, NERC modified its rules of procedure, effectively granting its  Standards Committee more flexibility around comment periods to expedite processes as needed. In addition, it “dropped” ANSI certification, “although we remain very committed to operating the standards process to the spirit of ANSI,” he said. “Finally, we’ve also given the board the authority when necessary to be able to direct the development of the standard and the timeline associated with this.” The change has already shown effectiveness in advancing winterization standards, Robb said.

5. Winterization and Grid Reliability

Given the dramatic impacts of Winter Storms Uri and Elliot, winterization has evolved into a concerted priority for NERC. The entity has worked doggedly to mitigate potential failures and enhance industry readiness for adverse weather conditions “over the last several years, both in terms of getting the requirements in place (which are now sitting in front of FERC for approval) but also to expand our outreach to industry, with the regional entities to really make sure that industry is fully prepared for the kinds of winter events that we’ve been seen over the last several years,” Robb said. “In May last year, we issued our first ever Level 3 alert, which articulates essential actions to get the industry ready for the upcoming winter season,” he noted.

The tool appears to have worked, as demonstrated by industry actions to mitigate reliability impacts during Winter Storms Gerri and Heather, which swept across North America from Jan. 10 to Jan. 17, 2024. [On April 30, FERC and NERC, in their assessment of the storms, underscored that “there was zero system operator initiated load shed during the severe weather events.] NERC has now set out to understand what made the storms less impactful. “We’re trying to get that effort done expeditiously and in time this year to inform our outreach for the next winter for the next winter season,” Robb said.

6. Addressing the Natural Gas-Electric Interface

A long-standing concern NERC and the power industry has grappled with relates to the interdependence between the bulk electric and natural gas systems, including the need for sufficient and reliable gas and electric infrastructure to sustain energy reliability. In the wake of Winter Storm Elliot, FERC and NERC recommended 11 immediate actions, including urging Congress and state legislators or regulators to establish reliability rules for natural gas infrastructure to ensure cold weather reliability. The recommendations also recommends that the North American Energy Standards Board (NAESB) convene a meeting of gas and electric grid operators and gas distribution companies to identify improvements in communication during extreme cold weather events. (NAESB, notably, in July 2023 issued a significant report outlining solutions to address “systemic weaknesses” in the natural gas and electric network nexus.)

Robb suggested the industry now finally starting to see “some movement toward trying to figure out how to make the two industries coexist.” A key challenge has been “that natural gas policy and natural gas industry restructuring was started in the late 1970s, and it culminated in the 1980s when gas was not a really significant part of the electric grid,” he explained. “It wasn’t nearly as ubiquitous as it is today. Today, the electric grid is 40% fueled by natural gas on an energy basis. About 40% of natural gas production goes into the energy sector—so we’re inextricably linked now. And really, the two systems have moved beyond interdependence to be really fully interconnected. And we need to be able to think about them as as one system.”

Robb lauded the work done by NAESB. More progress is on the horizon, he suggested. “I think that the work that the National Association of Regulatory Utility Commissioners (NARUC) Gas-Electric Alignment for Reliability (GEAR) is conducting can help advance the ball even further,” he said. “A couple of the gas trades and the competitive generator trade association [Electric Power Supply Association (EPSA)] put forward some ideas on how some of these recommendations could be implemented.” In addition, the ISO-RTO Council recently published a white paper on changes to align the two systems, he noted. “What’s great about this is this is the first time we’ve seen the whole ecosystem starting to lean in to really try to propose some solutions to a really critical issue—and it was going to be an increasingly critical issue for electric reliability into the future.”

7. Cyber and Physical Security Risks

At the briefing, Manny Cancel, senior vice president of NERC and CEO of E-ISAC, provided a sobering analysis of threats facing the grid amid what he noted was already increasingly complex grid environment. Threats have been exacerbated by global geopolitical tensions, including Russia’s intensifying aggression in Ukraine and the escalating Israel-Hamas conflict, Cancel said. “Obviously, the current geopolitical situation has significant ramifications for the North American grid,” he remarked, pointing to the involvement of state actors like China, Russia, Iran, and North Korea in cyber espionage and attacks. 

Cancel laid out key learnings from GridEx VII, E-ISAC’s seventh grid security exercise, which took place in November 2023. Over 15,000 participants from around 250 organizations across North America, including the electric industry, gas and telecommunications sectors, and U.S. and Canadian government partners, engaged in the two-day exercise orchestrated by E-ISAC’s GridEx team last year.

GridEx VII emphasized a stronger need for the industry’s evaluation and deployment of resilient voice and data communication measures, Cancel noted. It also showed the urgency for enhanced operational frameworks amid prolonged disruptions in energy markets and improved coordination and clarity between the industry and the federal governments of the U.S. and Canada.

8. Strengthening Physical Security Measures

In addition to cyber threats, Manny Cancel also addressed the crucial aspect of physical security for the North American grid. The vulnerabilities and challenges extend beyond digital threats, as physical attacks on infrastructure can also lead to severe disruptions. During the briefing, Cancel discussed the increasing concerns over physical security incidents, which have been a persistent threat to grid stability.

“Physical security remains a critical component of our overall security strategy,” Cancel emphasized. He pointed out that physical attacks, such as vandalism, theft, and ballistic damage, although less frequent than cyber attacks, pose a significant risk to the integrity of the power system. These types of incidents can lead to immediate, visible damage and potentially widespread outages if critical infrastructure is targeted, he said.

Cancel noted more than 2,800 physical security events were shared with the E-ISAAC in 2023. “The E-ISAAC continues to observe an elevated level of serious incidents leading to grid impacts—and by grid impacts, I mean an impact that either caused an outage or an operational contingency. But we’re not aware of any substantial increase beyond the elevated threat that started in 2022.” Of the thousands of incidents reported, about 3% had an impact on the grid, but none “led to cascading outages,” he noted. “The most serious incident incidents continue to be the result of ballistic damage or theft, intrusion and tampering and vandalism.”

However, Cancel cautioned that the E-ISAAC observed a correlation between the uptick in activity and the elections. “We anticipate that it could be an opportunity for an increase, as we know activists continue to use this as a vehicle to get their ideal ideology and other political thoughts across.” Nonetheless, E-ISAAC will continue to be “very vigilant during this current election cycle and continue to work with our partners in the industry and the government to make sure we’re aware of what’s going on,” he said.

“GridEx VII’s scenarios explored, or further explored, the challenges presented by a coordinated and prolonged cyber and physical attack against the grid and its market systems,” Cancel explained. He emphasized the critical importance of acting on these findings: “Lessons learned are great, but they’re of no use if we don’t put them into practice.”

Sonal Patel is a POWER senior editor (@sonalcpatel@POWERmagazine).

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