February 9, 2016 by John Moore, Senior Attorney, The Sustainable FERC Project
The Clean Power Plan requires states to take grid reliability into account when developing their compliance plans. What does this mean? New guidance from the North American Electric Reliability Corporation (NERC), the organization which oversees the reliability of the North American electricity system, provides some answers. NERC recommends nine reliability considerations that states should include when designing their plans. Most of NERC’s suggestions are on the mark.
Clean power and a more reliable grid can go hand in hand
NERC’s guidance, Reliability Considerations for Clean Power Plan Development, affirms that implementing the Clean Power Plan and other clean energy standards doesn’t have to come at the expense of a reliable grid. Based on studies and actual operating experience to date, I think it’s safe to build on NERC’s guidance and say that expanding wind, solar, storage, efficiency, and other clean energy resources actually would strengthen the grid and enhance reliability.
Notable findings in NERC’s report include:
- “Collaborative interaction between the state plan designers and planning entities is essential.” States gain so much from ongoing collaboration with regional grid planners. These relationships facilitate implementation of state clean energy policies, enhance reliability, and save money by avoiding duplicative infrastructure spending. Coordination will be especially important as more states and utilities expand wind and solar development, invest in rooftop solar and electric vehicles, close uneconomic coal plants, and provide more customer-friendly electricity pricing options.
- “Emissions trading promotes additional compliance options by effectively broadening the compliance region as well as the availability of allowances and credits.“ The Clean Power Plan incorporates numerous design elements that promote reliability through flexibility. Chief among these is the ability for entities within and across state lines to trade emissions reductions in order to optimize local reliability concerns. As NERC rightfully notes, “trading in general promotes reliability.”
- NERC cautions against easy use of the Clean Power Plan’s reliability safety valve, since states wanting to use it face “a very high hurdle given the multiple market-based options provided in the final rule.” NERC hits this right on the money. States should not view the reliability safety valve as a “get out of jail free” card in a planning or operational sense, but rather as an emergency, short-term mechanism in the case of wholly unforeseen events. The CPP’s flexible design allows for states to incorporate reliability concerns into compliant carbon pollution reduction strategies, and to adapt to changes in planning and operations without ever triggering the safety valve.
The interconnected grid transcends state boundaries
Map courtesy S&P Global Market Intelligence
In three areas of the report, NERC could have provided a more complete picture: energy efficiency, renewable energy, and infrastructure development (or, as energy geeks say, “pipes and wires”).
Harnessing efficiency strengthens reliability
NERC is right that energy efficiency may “play a prominent role in helping states achieve compliance with the CPP.” We agree with NERC that utilities and grid planning regions should adopt best practices in load forecasting to better account for energy efficiency that states are implementing. Close analysis can reveal thousands of “negawatts” of energy efficiency from building and appliance codes and consumer behavior that current load forecasts are missing, plus more savings from electric utility efficiency programs. Failing to account for these resources will result in overbuilding the system and unnecessary costs for consumers. Most planning regions are now moving in the right direction, while others lag. Harnessing the power of the negawatt is an affordable and reliable option for Clean Power Plan compliance.
But . . . some statements in the NERC report might lead states to misinterpret NERC as saying that deploying efficiency in the Clean Power Plan requires complicated new evaluation, measurement, and verification (referred to as “EM&V”) for all efficiency programs. That’s not the case.
States that adopt mass-based plans will be able to see the impact of energy efficiency directly at the power plant smokestack, since energy efficiency causes grid operators to “turn down” fossil fuel-fired power plants in response to less demand. States that expand energy efficiency programs as part of their CPP compliance strategies will want to ensure grid operators understand and plan for this investment, but after-the-fact EM&V is not necessary: savings forecasts based on the measures that will likely be put in place under expanded programs are sufficient.
For rate-based plans, EM&V is necessary to accurately calculate Emissions Reduction Credits (which are an integral component of rate-based compliance). Fortunately, many states with utility efficiency programs already use EM&V to measure efficiency performance, so they are well-positioned to create the additional EM&V necessary for ERCs.
Wind and solar power support system reliability
NERC expressed concern that retiring coal plants – or changing the operations of existing units – and expanding wind and solar energy could result in lower reserve margins or a shortage in the “essential reliability services” necessary to keep the power grid function. NERC’s guidance somewhat soft-pedals the grid values of renewable energy, which have the capability and in some cases are already providing important services that help balance power supply and demand on the electric grid. Additionally, as NERC states, these resources can count toward resource adequacy requirements (how much power plant capacity is available to meet forecast demand), which is an important component of reliability.
Increasing renewables and rooftop solar can also provide an opportunity to change the “shape” of electricity demand. These clean energy resources can help smooth out the difference between periods of high electric demand (such as during the day) and those with very low demand (like late at night). That will reduce the need for fossil generation while saving money.
We can build more transmission and use more rooftop solar
NERC continues to be concerned that “significant lead times” for infrastructure development “could potentially impact successful implementation of a state plan.” In truth, utilities are already in the process of upgrading infrastructure systems, with spending from investor-owned utilities of over $85 billion in the decade from 2002 to 2012 (tracked by the Department of Energy). To put that in context, the Brattle Group, a respected energy consulting firm, estimates that the CPP could require an additional $20 billion by 2030. That’s easily achievable in the CPP’s long time frame. More transmission also can boost reliability and open access to more wind power, as shown in a recent Southwest Power Pool transmission study.
Rather than looking at past spending trends, however, the better question is where we want to direct future infrastructure spending. Rooftop solar and other distributed energy resources are exploding in popularity, reducing the need for some transmission lines. Policymakers also are increasingly appreciative of the value of high voltage direct current (HVDC) transmission lines that leapfrog over local transmission bottlenecks to deliver high-value, low-cost wind power hundreds of miles to consumers. These two developments alone will further reduce the need for new natural gas pipelines.
Many new power lines in development
Map courtesy S&P Global Market Intelligence
Plan, plan together, and plan for clean
NERC’s advice to the states for CPP planning includes valuable advice for the states: early, collective planning can tackle reliability challenges head on while improving compliance. As states start planning, they should take full advantage of the flexibility provided by the rule to pursue interstate coordination and trading. In doing so, they will be better able to maximize the use of clean energy resources for affordable, reliable CPP compliance.