J.Pollock Blog

The Energy Transition

All is not well in “Grid-Land.”  The NYISO and MISO have recently issued warnings about the challenges to maintaining a reliable system in meeting decarbonization mandates (see the S&P articles below).  Especially concerning is that mandates are accelerating the retirement of older fossil-fuel units that the RTOs say are needed to avert capacity shortages.  More concerning is the growing reality that the decarbonizing technologies essential to completing the energy transition are not ready, not even close.  

NYISO and MISO are not alone in voicing their concerns.  We only have to look across the pond to see that Europe, despite its well-publicized transition to a decarbonized power sector, is also facing severe capacity shortages and extreme energy prices due to the accelerated retirements of coal and nuclear (zero carbon) plants and its over-reliance on intermittent resources and foreign (Russia).  Ironically, fracking (which it rejected and is not actively considering) could help Europe solve its energy problems.  

All of these events continue to test the assumption that a reliable electric system can be powered 100% by renewable resources.  The unintended consequence is that if we are not able to complete the transition soon, we could soon create energy poverty, much like the developing world, putting at risk not only the resilience and strength of our economy, but also the lives of its underserved citizens.   

The recently adopted climate legislation (inaptly titled “The Inflation Reduction Act”) will only accelerate the problems.  If the wind/solar manufacturers respond to the IRA by raising prices on key components and materials (just as colleges raised tuition when the Federal Government got into the student loan racket), energy (like college) will not be any more affordable.  

NYISO report warns that New York will miss ambitious climate targets PLATTS

Thursday, August 25, 2022 1:18 PM CT

By  Jason Fargo

A draft report from the operator of New York’s power grid warned that the state is unlikely to meet state goals for decarbonizing the power sector by 2040, adding that doing so would require a massive deployment of unproven technologies such as hydrogen and small modular nuclear reactors.

The draft report, released Aug. 17 by the New York ISO‘s Business Issues Committee, further found that currently planned renewable generation projects will be insufficient to meet the goal of 70% renewable generation by 2030 set in the state’s 2019 Climate Leadership and Community Protection Act, or CLCPA.

Moreover, the NYISO found that much of that new generation will run the risk of curtailment without substantial investments in new transmission lines to move the power to demand centers.

The document was marked “for discussion purposes only” and has not yet received board approval.

Looking farther ahead, the NYISO cautioned that the CLCPA target of achieving a fully emissions-free electricity grid by 2040 will not be possible without the incorporation of dozens of gigawatts of “dispatchable emission-free resources,” dubbed DEFRs, to provide reliable baseload power as fossil fuel-fired capacity is retired in favor of intermittent renewables.

“DEFRs that provide sustained on-demand power and system stability will be essential to meeting policy objectives while maintaining a reliable electric grid,” the grid operator said.

But it offered a caveat: “While essential to the grid of the future, such DEFR technologies are not commercially viable today and will require committed public and private investment in research and development efforts to identify the most efficient and cost-effective technologies with a view toward the development and eventual adoption of commercially viable resources.”

New capacity needed by 2040

To meet the state’s decarbonization targets, the document said the amount of new generation capacity that NYISO projects will be required is immense, projected to range from 111 GW to 124 GW of total generation capacity by 2040.

“At least 95 GW of this capacity will consist of new generation projects and/or modifications to existing plants, and still may not be sufficient to fully meet CLCPA requirements while maintaining the reliable electricity supply that New York consumers have come to rely on,” the NYISO continued. “The sheer scale of resources needed to satisfy system reliability and policy requirements within the next 20 years is unprecedented.”

The document compared a “contract case” that includes some 9,500 MW of new renewable generation capacity already contracted in the state to meet projected energy needs in 2030. The NYISO projected that the state would have about 100 TWh of renewable generation available in 2030, including behind-the-meter solar, which is somewhat above 60% of total generation but below the 70% target.

Meeting the 2030 goal and the more-ambitious 2040 zero-emission target a decade later will be an extremely tall order given the long lead times required to develop new power plants, the NYISO said.

“In general, resources take years from development to deployment. By the year 2030, roughly seven years from the publication of this report, an estimated 20 GW of additional renewable generation needs to be in service to support the energy policy target of 100% zero-emission generation by 2040,” the report said.

“For reference, 12.9 GW of new generation has been developed since wholesale electricity markets began more than 20 years ago in 1999. Over the past five years, 2.6 GW of renewable and fossil-fueled generators came online, while 4.8 GW of generation deactivated,” NYISO continued. “This outlook demonstrates the need for an unprecedented pace of project deployment, which will require significant labor and materials available for New York over a long period of time.”

Transmission challenges

Adding to the difficulties, the report said, is the lack of sufficient transmission infrastructure to transport the volumes of additional renewable power required. According to NYISO projections, at least 5 TWh of renewable power will be curtailed in 2030, and the figure will jump to at least 10 TWh by 2035 as new generation capacity outstrips planned transmission upgrades.

“Transmission expansion is critical to facilitating efficient CLCPA energy target achievement,” the NYISO said. “The current New York transmission system, at both local and bulk levels, is inadequate to achieve currently required policy objectives.”

A big part of the challenge, the report said, is that much of the new capacity being brought online in the coming years will be in areas that lack good grid access.

“A significant portion of projected renewable generation will be built in upstate New York areas that are geographically and electrically distant from the major consumer hubs in downstate New York, in which fossil generation is being retired,” the NYISO said. “Bulk and local transmission constraints on today’s grid will limit the effective delivery of renewable energy to consumers throughout the state.

“Without significant timely transmission expansion to provide access to renewable energy resource-rich areas, the renewable energy cannot efficiently traverse New York state and be delivered to consumers,” the agency stressed.

The report noted that transmission limitations will be particularly acute in the Finger Lakes, Southern Tier and Watertown regions upstate, as well as on Long Island, where the NYISO said that as much as 20 GW of new offshore wind capacity may be installed.

New York’s transmission owners are in the middle of a significant transmission build-out to help achieve the state’s climate change goals and have more planned. In recognition of this work, the NYISO assumed that “sufficient transmission expansion” occurs to fix lower-voltage constraints and to meet the state’s 2035 decarbonization targets.

In its modeling to 2040, the NYISO projected two scenarios, both of which assume that peak electricity demand ceases being a summertime phenomenon, as it is today, and moves to the winter season as residences and businesses switch from natural gas to electricity for heating. The first scenario for 2040 projects a winter peak demand of 57,144 MW, with overall demand during the year of 208,679 GWh, The second scenario projects a lower winter peak of 42,301 MW but a higher annual demand of 235,731 GWh.

MISO study says 200 GW new capacity needed by 2041 to meet climate goals PLATTS

Thursday, August 25, 2022 11:59 AM CT

By  Kate Winston
Commodity Insights

A draft study by the Midcontinent ISO shows that utility decarbonization goals could require 200 GW of new capacity by 2041 and highlights the ongoing risk of a capacity shortfall in the region, MISO staff said Aug. 24.

MISO North and Central had a 1.2-GW capacity shortage in the planning resource auction for the planning year that started June 1, and MISO’s draft 2022 Regional Resource Assessment offers further evidence that the trend could continue.

“Right now, we see ongoing risk over the next several years,” Hilary Brown, an engineer in the policy studies group at MISO, said at a meeting of MISO’s Resource Adequacy Subcommittee. The timing for capacity risk depends on the zone, and some zones show an immediate capacity risk, which reflects the shortage in the most recent capacity auction, she said.

For instance, the draft RRA shows that the estimated accredited capacity of existing and planned resources in local resource zone 5 in Missouri falls well short of the estimated reserve requirement in 2023 and beyond, according to a document detailing zonal level results posted on MISO’s website.

Evolving resource mix

The RRA is an annual study in which MISO aggregates utilities’ publicly announced plans and goals and uses them to develop a view of how the resource mix will evolve.

The 2022 RRA found that a significant acceleration of resource expansion is needed to meet utilities’ combined carbon reduction plans. More than 100 GW of new capacity will likely be needed by 2030, and 200 GW may be needed by 2041, according to a presentation discussed at the subcommittee meeting.

When resource plans were not available, or the plans did not provide information for the full 20 years considered in the study, MISO modeled the capacity additions that will be needed to meet renewable and decarbonization goals while still meeting the planning reserve margin.

Compared to a 2005 baseline, the MISO region is projected to reduce carbon dioxide emissions by 65% by 2030 and by nearly 80% in 2041, the RRA said. MISO’s renewable penetration could hit 30% sometime between 2027 and 2028, and 40% in 2030, the presentation said. Penetration will hit 50% in 2036 and exceed 60% in 2041, according to the RRA.

The pace of penetration growth is significant because MISO has warned that renewable integration will get significantly more complicated when renewable penetration reaches 30%-40%.

That level reflects an inflection point at which existing infrastructure may be inadequate to access diverse resources, regional energy transfers will increase in magnitude and variability, and power delivery may need new transmission technologies with dynamic support capabilities, according to MISO’s 2021 Renewable Integration Impact Assessment.

This year’s RRA findings also outline a significant acceleration from the previous study. Last year’s RRA found that 140 GW of new capacity would be needed by 2040 and that renewables would hit 40% penetration in 2040.

Given the findings of the new RRA, now is the time to plan for that renewable penetration inflection point, said Tom Butz, a utility planner at ALLETE Inc. subsidiary Minnesota Power Inc. “We need to understand how those unanswered questions will be dealt with,” Butz said.

Some stakeholders said the penetration estimates could increase even more rapidly in next year’s RRA because the tax credits in the Inflation Reduction Act will encourage even more robust renewables investments.

“With the IRA, I think we are going to see some pretty significant changes in how utilities are behaving in the system in the next iteration,” said Simon Mahan, the executive director of the Southern Renewable Energy Association.

Commodity Insights reporter Jason Fargo writes for S&P Global Dimensions Pro. S&P Global Commodity Insights is owned by S&P Global Inc.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.