Capacity Market Demand Response Energy Efficiency FERC Planning Renewable Energy States

A Reminder of the Need to Get More Clean Power onto the Electric Grid

February 10, 2014

A cold Sunday morning in Washington, DC isn’t when you would expect to find hundreds of utility regulators and energy geeks talking about electric power resource adequacy, but that’s exactly what happened yesterday morning. The National Association of Regulatory Utility Commissioners (NARUC) is holding its annual Winter Committee meetings this week, and one of its kickoff events was the now-traditional Sunday morning NARUC/FERC Collaborative, an event heavily populated with state and FERC commissioners, staff and other stakeholders.

This year’s topic was resource adequacy – assuring that power is available when we need it now and in the future. Wind and solar power figured prominently in the discussion; unfortunately, energy efficiency received no mention.

Organizers for the Collaborative brought RTOs, utilities, and other market participants from across the country to discuss the state and FERC roles in assuring resource adequacy. Utility regulatory expert Scott Hempling kicked off the morning by summarizing FERC and state spheres of jurisdiction. Check out his new and useful Electricity Jurisdiction “cheat sheet” to help understand these sometimes unclear boundaries.

The panelists focused on several questions, including how best to craft a reserve margin (the level of additional power resources reasonably necessary to protect against unexpected power needs), and whether forward electricity capacity markets are needed to maintain the financial viability of nuclear power and other resources and spur new resource development. The very recent events of the “Polar Vortex” were on everyone’s minds: record-high gas and electricity prices and power plant breakdowns remind us of the need to continue to increase our supply of clean power with zero fuel cost and no carbon emissions.

Make Room for Wind and Solar

Panelists from all regions commented on the impact of increasing levels of renewable energy on planning reserve margins and capacity markets. The Electric Reliability Council of Texas (ERCOT) was cited as having among the best renewable energy integration operational rules in the country. At least one speaker made the point that we can expand renewable energy supply simply with better operational practices such as sub-hourly energy market dispatch, better forecasting, and other solutions.

Xcel Energy’s representative pointed out that future capacity market design needs to consider factors beyond peak demand, such as flexible, fast-acting resources and firm fuel arrangements to avoid natural gas supply shortfalls. Flexible resources such as fast-acting combustion turbines and demand response are valuable because they can “ramp” up and down in tandem with renewable power output – for example, ramping up to meet late afternoon peak demand as the sun sets and solar panel power levels decline.

DOE Chart

Other themes at the Collaborative included:

  • More regional and inter-regional power sharing improves reliability and saves money. It’s clear from listening to the panels (even if some of the panelists didn’t admit it) that bigger is usually better for overall system reliability, power-sharing and renewables integration. We are awaiting FERC’s decisions in the pending Order 1000 inter-regional compliance filings, knowing that strengthening inter-regional planning helps the electric grid, consumers, and the environment.
  • Different regions face unique challenges, such as droughts in California, natural gas supply challenges, and other region-specific market and resource issues. Again, regional and interregional cooperation can help meet these challenges.
  • Continuing sharp disagreement over whether mandatory forward capacity markets are needed to maintain financial viability of existing resources.  MISO figured prominently here. Exelon (an independent power producer with mostly-nuclear fleet) criticized MISO’s lack of an effective capacity market, which relies on integrated state planning to meet most of MISO’s capacity needs. Wisconsin Commissioner Callisto pointed out that Dominion Resources did not cite MISO’s lack of a mandatory market as a reason for closing its uneconomic Kewaunee nuclear power station near Green Bay, Wisconsin.

Whither Energy Efficiency?

One disappointment was that no one mentioned energy efficiency as a cost-effective resource adequacy solution, even though it’s cost-effective and measurable and most RTO capacity markets allow efficiency to compete against power plants. As the Regulatory Assistance Project points out in a new report, expanding energy efficiency, along with energy storage and other solutions, can help integrate clean power into the grid and “teach the duck to fly” (a reference to a now-popular California ISO chart) by smoothing out high ramp demands and further reducing carbon pollution from both gas and coal plants. We agree: States and the FERC should devote more attention to both measuring and incenting energy efficiency as a dependable capacity resource.