April 17, 2022 at 9:50:59 AM CDT
Concerns were raised about whether the planned resource additions will be sufficient to ensure that electricity supply remains reliable. Recent developments validate these concerns.
For example, in its most recent Long Term Reliability Assessment (LTRA), NERC identified two key findings that directly relate to the reliability and sufficiency of both capacity and energy supply.
Key Finding 1 (Reserve Margins):
Anticipated reserves fall below the Reference Margin Level (RML) in MISO beginning in 2024, NPCC-Ontario beginning in 2025, and California (WECC-CA/MX) beginning in 2026. For all other areas, anticipated capacity reserves are above their respective RMLs for the first five years of this assessment period, indicating that there will be sufficient electric resources to meet peak demand. Note, however, that this reserve margin analysis does not explicitly account for resource energy limitations due to fuel uncertainty. Details include the following:
- MISO could face the loss of over 13 GW of resource capacity from 2021 to 2024 based on its annual survey of members. These unconfirmed retirements include 10.5 GW of coal-fired and 2.4 GW of natural-gas-fired generation. A capacity shortfall of over 560 MW in 2024 would result if all of these unconfirmed retirements were to occur without additional new generation resources (on top of the 8 GW already in development for interconnection by 2024).
- The planned retirement of the 2,200 MW Diablo Canyon Power Plant generating stations in 2024 and 2025 contributes to a projected capacity shortfall in WECC-CA/MX beginning in 2026. Reserve margins in WECC-CA/MX are also declining because of the energy limitations of solar PV resources at the peak demand hour, which occurs later in the day when solar PV resource output is lower.
- In Ontario, results of the Independent Electricity System Operator (IESO) capacity auction held in December 2020 as well as the delayed retirement of a nuclear generating station have alleviated near-term capacity concerns identified in the 2020 LTRA. IESO expects to meet the 2025 reserve margin shortfall projected in this year’s assessment with capacity obtained through a series of recently announced procurement mechanisms and increased participation in the capacity auction.
- NPCC-Maritimes (Eastern Canada and Northern Maine) reserve margins fluctuate around Reference Margin Level over the assessment period; results of annual and short-term capacity procurements are expected to mitigate these small shortfalls.
Key Finding 2 (Energy Risks):
Since the publication of the ERO’s probabilistic assessment (ProbA) in 2020, additional analysis indicates that risk of load loss and energy shortfalls persist in the Western Interconnection and MISO areas. Details include the following:
- The 2020 ProbA identified elevated load-loss risk in MISO, Saskatchewan (MRO-SaskPower), and the Northwest-Rocky Mountain (WECC-NWPP-RMRG), it also identified high risk in WECC-solar generation to meet projected peak demand. MISO and the U.S. Southwest are approaching similar thresholds in near-term projections. In the event that one or more of these resources fall short of forecast at peak conditions, other resources must make up the gap, or load will need to be shed.
- Reliable operation of thermal generating units and fuel assurance is critically important, especially during extreme weather events.(Emphasis added)
NERC’s findings on MISO’s potential issues were prescient. In its most recent Planning Resource Auction (for planning year 2022/2023 which begins this June), the North Central local resource zones all cleared at the cost of new entry (CONE) price. MISO’s press release states:
CARMEL, Ind. — The Midcontinent Independent System Operator (MISO) released the results of its 2022-2023 annual Planning Resource Auction (PRA) indicating capacity shortfalls in both the north and central regions of MISO. This encompasses parts of 11 states in the Midwest. MISO remains committed to continue its work with members and state regulators to maintain grid reliability across the entire 15-state MISO footprint.“We have anticipated challenges due to the changing energy landscape and have communicated our concerns through the Reliability Imperative. We have prepared for and projected resource fleet transformation, but these results underscore that more attention is required to offset the rate of acceleration,” said MISO Chief Executive Officer John Bear. “These results do not undermine our ability to meet the immediate needs of the system, but they do highlight the need for more capacity flexibility to reliably generate and manage uncertainty during this transition.”
The Local Clearing Requirement – capacity required from within each zone – was met for the entire MISO Region, but Zones 1-7 cleared at the Cost of New Entry (CONE).
Zones 1-7 (parts of Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, North Dakota, South Dakota and Wisconsin) all cleared at $236.66/MW-day.
Zones 8-10 (parts of Arkansas, Louisiana, Mississippi and Texas) cleared at $2.88/MW-day. Load Serving Entities (LSEs) that entered the MISO auction without enough owned or contracted capacity to cover their requirement (load plus reserves) will pay these prices for the amount of capacity they are ‘short’. The cost impact to consumers of those LSEs with a shortfall will depend on the amount they are short and the LSE’s retail rate arrangement with their state regulator. LSEs that entered the auction with sufficient capacity to cover their requirement will not need to purchase capacity at these prices.“
The reality for the zones that do not have sufficient generation to cover their load plus their required reserves is that they will have increased risk of temporary, controlled outages to maintain system reliability,” said Clair Moeller, MISO’s president and chief operating officer. “From a consumer perspective, those zones may also face higher costs to procure power when it is scarce.”
MISO’s Independent Market Monitor (IMM) has reviewed the offers and results of the 2022/2023 PRA and agrees with the results. This includes reviews of all offers to ensure that all attempts to exercise market power are appropriately mitigated as specified in Module D of the Tariff. This year’s results amplify the need for, and MISO’s efforts around, resource availability and market redefinition as outlined in the Reliability Imperative. This includes the recent FERC filing to enhance MISO’s current Resource Adequacy construct.
These recent events confirm the need to make absolutely sure that the transition to more renewable resources does not jeopardize the reliability and affordability of the electricity supply that is essential to our national economy and our standard of living.