NERC: Unprecedented Changes to Power Mix, EPA Rules Pose Reliability Challenges

North America’s reserve margins are trending downward, even though electricity demand has generally fallen, the North American Electric Reliability Corp. (NERC) warned in a new report.

The international regulatory authority established to gauge and improve the reliability of North America’s bulk power system (BPS) said in its annual long-term report that electricity demand has dropped during the last decade in large part due to energy efficiency and demand response programs, as well as a decline in large, end-use customer loads.

Mostly because the entire system is undergoing “unprecedented change in the resource mix at an accelerated pace,” the BPS will also see tighter margins beyond 2020, which raise potential long-term concerns, says NERC’s 2015 Long-Term Reliability Assessment.

It clarifies, however, that reserve margins of assessed regions in the U.S. or Canada aren’t expected to drop below reference margin levels in the short-term between 2016 and 2021.

Gas to Trump Coal

Noteworthy changes over the past few years include the retirement of about 21 GW of mostly smaller coal-fired units between 2012 and 2014. An additional 27 GW is scheduled to retire by 2025.

Natural gas units, too, are seeing closures. About 11 GW have been retired between 2012 and 2014, and an additional 10 GW is scheduled to retire by 2025. Renewable, petroleum, nuclear, and less-efficient units that have reached the end of their lifespans amount to 6 GW of planned retirements by the end of the assessment period in 2025.

That could mean that coal’s share of the resource mix will drop to 27% of total available capacity by 2025, while natural gas will contribute 43% as 97 GW of new gas units come online. The early retirement of nuclear units may pose a challenge to planners and operators in maintaining reserve margin levels, but for the most part, they will be offset in the long-term by the addition of Watts Bar 2, the Vogtle units, and the V.C. Summer units, which are all scheduled to come online by 2020, NERC said.

NERC noted that changes to the resource mix are being driven by several factors—including state, provincial, and federal environmental rules as well as low natural gas prices and the integration of distributed and utility-scale renewables.

“In order to maintain an adequate level of reliability through this transition, generation resources need to provide sufficient voltage control, frequency support, and ramping capability as essential components to the reliable operations and planning of the BPS,” NERC said, calling on policy makers to recognize the need for essential reliability services provided by the current and future mix of resources.

NERC also recommended conducting an analysis of this transformation to allow for effective planning and to provide system operators the flexibility to modify real-time operations and future planning of the BPS.

Among NERC’s cited reliability concerns are, predictably, a growing reliance on natural gas, especially as it relates to the ability of both gas and electric infrastructures to maintain BPS reliability. “There is a need to enhance planning approaches to consider fuel deliverability, availability, and responses to pipeline contingencies that are unique to each area,” the report says.

Distributed energy resources (DERs)—which are not directly interconnected to the BPS, but to subtransmission and distributed systems typically linked behind customer metering facilities—are also prompting changes in grid operations, NERC said. “As more DERs are integrated, the supply of control to System Operators can decrease. However, distribution-centric operations can reliably support the BPS with adequate planning, operating and forecasting analyses, coordination, and policies that are oriented to reliably interface with the BPS,” it said. “Coordinated and reliable integration of DERs into the BPS can also present opportunities to create a more robust and resilient system.”

Environmental Rules to Fuel Accelerated Shifts in Resource Mix

The Clean Power Plan (CPP) and other environmental rules have also triggered changes: NERC said they have been “a large impetus behind the shift from coal and toward natural gas and renewables.” Future accelerated shifts in the resource mix can be expected as a result of the CPP, NERC said, adding that it plans to release a guidance and recommendation document in January 2016 that will underscore reliability issues for states as they develop their states or regional plans.

Among other rules impacting reliability in the U.S. are the Mercury and Air Toxics Standards, the Cross-State Air Pollution Rule, the 316(b) cooling water intake rule, and the coal combustion residuals rule.

In Canada, rules for carbon emissions “continue to become more stringent, resulting in the imminent retirement of coal-fired units,” NERC said. It also highlighted efforts by provinces like Ontario, Quebec, and Alberta to put in place or broaden carbon-trading systems.

Other factors that could impact reliability of the BPS include load forecasting uncertainties, a workforce transformation, aging infrastructure, and coordinated cyber or physical attacks on electricity infrastructure, it said.

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)