NERC Identifies Energy Policy as Key Risk to Grid Reliability Amid Evolving Challenges
The North American Reliability Corporation (NERC) will for the first time consider “energy policy” among five significant evolving and interdependent risks to grid reliability.
In its latest biennial ERO Reliability Risk Priorities Report, the designated North American Electric Reliability Organization (ERO) identifies energy policy as a new risk priority alongside grid transformation, resilience to extreme events, security risks, and critical infrastructure interdependencies. The report, which presents NERC’s Reliability Issues Steering Committee’s (RISC’s) strategic efforts to identify and prioritize risks to bulk power system (BPS) reliability, was approved by the entity’s Board of Trustees on Aug. 17. The report “compliments” NERC’s Long Term Reliability Assessment, which is “a data-driven assessment of potential future scenarios during the next 10 years,” NERC said.
“This is the best RISC report to date,” NERC Board Chair Ken DeFontes said during the board meeting. “The committee has drawn attention to some key, new risk profiles including the need to bridge important jurisdictional lines in energy policy and the interdependencies between our industry and other critical infrastructures, such as natural gas, while acknowledging the rapid pace of grid transformation and the increasing security threats. This report is important for industry as we prioritize the way to best assure the reliable operation of the North American grid.”
The Reality: Another Intense Summer
The report’s publication is especially relevant given mounting concerns across the BPS about sustaining reliability, particularly during extreme weather events. While NERC says the BPS has generally remained highly reliable and resilient, it has noted that conventional generation in 2022 experienced its highest level of unavailability (8.5%) overall since NERC began gathering Generating Availability Data System (GADS) data in 2013, correlating with higher numbers of startups and maintenance outages. Meanwhile, as inverter-based resource (IBR) capacity has increased, their variability has ramped up operational demands on conventional generation. Last year (2022) also marked the second year in a row in which extreme temperatures created substantial reliability challenges, spurring several Level 3 emergency alerts, NERC noted.
The issues, unresolved, have led to a series of dismal outlooks, both for summer and winter. While investigations were ongoing into the glaring gaps exposed by Winter Storm Elliot last Christmas, in May, NERC warned that two-thirds of North America could be at risk of energy shortfalls during periods of extremely high electricity demand this summer (spanning June through September). Grappling with falling reserve margins and surging peak demand, the Southwest Power Pool (SPP) has so far this summer issued several “conservative operations” advisories, citing “increased uncertainty in potential capacity adequacy due [to] continued high temperatures, [variable energy resource] forecast, and high load.”
In Texas, the Electric Reliability Council of Texas (ERCOT) has also issued several “voluntary conservation” notices, seeking to tamp down peak demand during the late afternoon and evening hours, when its solar generation begins to diminish. ERCOT, notably, set a new, all-time, unofficial peak demand record of 85,435 MW on Aug. 10, 2023. (The region’s official peak demand record of 80,148 MW was set on July 20, 2022.)
Repeatedly stepping up to ensure public visibility of these calls, the Public Utility Commission of Texas (PUCT) once again on Thursday urged the public to heed voluntary conservation. Along with the extreme heat, record demand, lower forecast wind generation, and solar decline in the evening hours, ERCOT cannot depend on “switchable” generation resource capacity—generators dually connected to other control areas—the PUCT underscored. “Independent System Operators (ISOs) in other states are going through similar extreme heat conditions and have asked for switchable generation resource capacity back to assist their regions. These switchable generation resources are within the primary control of other ISOs,” the agency said.
Afflicted with higher-than-anticipated loads and temperatures across the grid, California ISO, too, has on several occasions declared an “energy emergency alert watch”—the first step in its grid emergency protocol. On two occasions this month, it issued a Restricted Maintenance Operation (RMO), an action that cautions utilities and transmission operators to avoid taking grid assets offline for routine maintenance to ensure all resources are available.
And on Aug. 21, the Midcontinent ISO (MISO) joined the slew of grid operators flagging “challenging operating conditions,” warning that a prolonged, major heat wave that has settled across the central U.S. could create “tight conditions” this week. “We anticipate challenging operating conditions throughout the entire week, and we will need every available resource at some point,” said Jessica Lucas, MISO’s executive director of System Operations on Monday. “We have issued several alerts and advisories based on the weather forecast. More emergency procedures may be required to keep the power flowing. That’s typical for a weather event like this.”
Industry Perception of the Most Critical Risks Have Shifted
While this summer’s setbacks generally fall within the expected realm of extreme heat–related challenges, NERC’s new Reliability Risk Priority Report suggests that industry perceptions of what constitutes the gravest risks to BPS reliability and stability have changed substantially over the last two years. Compared to 2021, resource adequacy and performance, and bulk power system planning, have shot up in rankings. The information, collected during a survey that wrapped up in January 2023, should be “useful for industry as a whole to prioritize and dedicate resources and budget,” the report notes.
Paramount among the myriad risks that industry has highlighted is that the resource mix is quickly transforming from “large coal-fired and nuclear power plants toward natural-gas-fired, renewable, and distributed energy resources,” the report notes. “The changing resource mix has resulted in a large amount of weather-dependent renewable variable energy resources, distributed energy resources, micro- and smart-grids, and demand response technologies as well as an increasing reliance on just-in-time delivery of natural gas to fuel new generating capacity.”
That transformation is “resulting in a different use of the power lines and changing the system’s dynamic,” it adds. However, in parallel, “the potential for cyber and physical attacks has increased as the adoption of advanced technologies compounds the reliance on digital controls and communication systems,” it notes. The coming electrification thrust, which could ramp up power demand from transportation and other industry, could add new “significant changes,” and require effective management, the report says.
An Overarching Risk Factor: Energy Policy
Until this summer, NERC has categorized risk profiles within four general buckets, though it underscores all risks are interdependent. Grid Transformation includes “the shift away from conventional synchronous central-station generators toward a new mix of resources that include natural-gas-fired generation; unprecedented proportions of non-synchronous resources, including renewables and energy storage; demand response; smart- and micro-grids; and other emerging technologies which will be more dependent on communications and advanced coordinated controls.” The Grid Transformation risks can increase the potential of Security Risks, which include cyber and physical security, it notes.
“Collectively, the new resource mix can be more susceptible to long-term, widespread Extreme Events, such as extreme temperatures or sustained loss of wind/solar, that can impact the ability to provide sufficient energy as the fuel supply is less certain,” the report explains. “Furthermore, there is an associated increase in Critical Infrastructure Interdependencies. For example, for natural-gas-fired generation, there is increased interdependency on delivery of fuel from the natural gas industry that also depends on electricity to support its ability to extract and transport gas.”
However, overarching all these challenges are the reliability impacts of Energy Policy, a new risk profile that has “broad implications across the risk profiles as it catalyzes changes and has the potential to amplify their effects,” NERC said. The report notes that Energy Policy can drive changes in the planning and operation of the BPS. Accordingly, “policy can affect BPS reliability and resilience and could present risks to its reliable operation,” it said.
RISC suggested that the inclusion of the new risk profile was driven by crucial gaps in policy-driven transitions that don’t take energy sufficiency into account. However, energy sufficiency—when resources meeting capacity requirements are able to produce enough energy to meet demand at any given time—is “increasingly critical,” the report notes. “Existing resource sufficiency requirements and underlying studies are based on a pre-decarbonization paradigm that traditionally focused on peak capacity requirements and assumed energy sufficiency would result; traditional resource adequacy planning is capacity focused,” it says. “With a higher proportion of variable and renewable fueled resources evolving, this aspect of resource adequacy must be more specifically assessed.”
RISC’s report also urges more “upfront planning” to mitigate natural gas and electric interdependency impacts, as well as to reliably incorporate aggregate distributed energy resources. “State, provincial, and utility level implementation of updated interconnection standards, such as IEEE 1547- 2018, is underway. Continued timely deployment of updated interconnection standards is important. Better understanding and planning for the impacts of aggregate DERs,” it notes.
Coordination and Collaboration Will Be Paramount
Ultimately, to mitigate energy policy risks, RISC recommends an “Increased coordination and collaboration between federal, provincial, and state policymakers, regulators, owners, and operators of the BPS as well as with the critical interdependent sectors is needed.” That may require education for policymakers and regulators “to increase awareness of the reliability implications of policy decisions is a critical need.” In addition, it will require education for industry, “as the developers of reliability standards” to help it “better understand the processes and implications of policy decisions.” For now, one step NERC intends to take is to continue to build on outreach and collaboration with state commissions and the National Association of Regulatory Utility Commissioners (NARUC).
NARUC, for its part, has been readying its members for the onslaught of transition-related changes. It says reliability has been a focus. During the organization’s policy summit in Austin, Texas, from July 16–19, NARUC’s public utility community—comprised of state and federal regulators, industry, consumer advocates, and others—kicked off the event by marking the 20-year anniversary of the 2003 Northeast Blackout. Panelists called for a better assessment of black start capabilities, understanding cyber risks, and creating and enforcing standards that keep pace with risks, the entity said.
“Other main stage topics included the Environmental Protection Agency’s recent regulations targeting per- and polyfluoroalkyl substances; workforce diversity and the role of utility regulators; and the effect of thermal generation retirements on reliability as many states advance aggressive clean energy goals,” the organization added. The summit also explored “how clean energy goals—particularly, the associated costs—may affect consumers.”
“Much of what we heard from our panels [during the summit] stressed the importance of greater communication among stakeholders, ways to engage regulators, and the need to understand and prepare for the challenges ahead of us,” said NARUC President Michael A. Caron, a Connecticut Public Utilities Regulatory Authority Commissioner. “We appreciate the input from so many different corners of the utility space, and the NARUC meetings allow us to facilitate balanced discussions from varying perspectives.”
—Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine).