NERC’s CEO now concedes that the reserve margin and 1-in-10-year loss of load event criteria are no longer adequate to assess resource adequacy and system reliability.  New tools and metrics are now needed.  The problem is not that the existing metrics are unreasonable — it is how these metrics are currently used.  

In most cases reliability metrics focus on the utility’s ability to meet its expected system peak demand.  While meeting expected system peak demand is essential to ensuring that the utility has sufficient resources, not all generating resources are created equal.  For example, intermittent (i.e., wind and solar) and just-in-time (i.e., natural gas) resources, coupled with insufficient winter weather preparedness, are posing significant challenges.  More frequent outages are occurring during winter peaks when solar is not available, gas supplies are curtailed, and fossil-fuel plants are susceptible to weather-related equipment outages.  As a result, summer-peaking utilities are setting target reserve margins based on winter peaks.  

Intermittent resources also add a further dimension to the challenge. Mother Nature, rather than humans, will determine when and how much wind and solar energy can be produced.  Because electricity is produced and consumed in real time, dispatchable generation will still be needed to compensate for the (sometime drastic) changes in net load that occur between daytime and nighttime and in the morning and late afternoon.  The risks are further compounded by inverter controls (which are installed at most solar, wind, and new battery resources) that trip in response to disturbances and dynamic conditions (grid faults).  Any imbalance might cause the local (or in extreme cases, the regional) grid to collapse.  

Reliable and affordable electricity is essential to economic and human flourishing.  While NERC is appropriately considering new resource adequacy metrics, this analysis should have been conducted prior to replacing (viaenvironmental rules and/or political mandates) vast amounts of dispatchable (coal and nuclear) capacity with intermittent and just-in-time resources.  Perhaps the lesson we should be learning is that any wholesale transformation of the electric grid should not occur without having the proper tools (i.e., inverter control standards, electric-gas integration, weatherization requirements, and appropriate reliability metrics) to maintain grid integrity.  

Just “winging it” is too risky.  

Q&A

North America’s transforming grid needs new reliability metric, NERC CEO says EXCLUSIVE

Monday, January 8, 2024 8:57 AM CT

By Garrett Hering
Commodity Insights

Jim Robb, president and CEO of the North American Electric Reliability Corp., speaks at a meeting of state regulators in November. Source: S&P Global Commodity Insights.

➤ “Basically rebuilding the grid”: New transmission is viewed as critical to moving renewable generation into markets.

➤ Top 2024 initiatives include inverter standards, winterization, a regional transmission study and facilitating gas-electric system coordination.

➤ The development of a new electric grid reliability metric based on energy rather than capacity is also a top priority.

Jim Robb is president and CEO of the North American Electric Reliability Corp., a nonprofit authority charged with assuring the reliability of the bulk power system serving more than 334 million people across the continental US, Canada and the northern part of Baja California, Mexico. In recent reports, NERC has warned of widespread short-term and long-term threats to keeping the lights on.

S&P Global Commodity Insights spoke with Robb about risks and opportunities related to growing demand for electricity and the clean energy transition at the annual meeting of the National Association of Regulatory Utility Commissioners, held in November in La Quinta, Calif. The following is an edited transcript of the conversation.

S&P Global Commodity Insights: How have you seen views of grid reliability evolve in the context of the clean energy transition?

Jim Robb: Around the summer of 2021, we previewed a really dramatic assessment. I think at that point, the clean energy crowd started to realize that if there was a reliability event it was going to set that agenda back quite a ways. So there’s been more balance in the conversation lately.

One hears that balance a lot now in California. Officials, advocates and the California ISO all talk about needing to avoid blackouts on the road to a zero-carbon grid.

I spent a bunch of time in California earlier in my career, so I understand a little bit about how that ecosystem works. I think it’s absolutely spectacular that the governor stepped in and helped extend the life of Diablo Canyon. That has issues associated with it because it’s not a very flexible resource but it’s a lot of kilowatt-hours, and a lot of clean kilowatt-hours.

Most importantly, California has stepped in to support Aliso Canyon. That is probably the most important energy asset in the state of California from an electric reliability perspective. The gas plants, when they have that afternoon ramp, when the solar comes off and the gas plants have to fire up, they are pulling gas from the Southern California Gas system much faster than any pipeline can deliver it. Aliso Canyon, because it’s got that very fast input-withdraw capability, it’s like a shock absorber on the system. Nobody really understood that, or at least it wasn’t part of the popular lexicon, until it was compromised.

These kinds of crises also present new opportunities, including for battery storage. California’s got a really big battery fleet now.

And it’s making a hell of a difference. That and the effectiveness of the conservation calls. The fact that we got through last summer, with that heat dome over the majority of the South, is extraordinary to me. Batteries also made a big difference in Texas this summer.

Given rising demand from datacenters, electric vehicles, heat pumps and other forms of electrification, you hear people talk about the need to massively expand the grid. Does it also need to be reinvented?

This is part of the opportunity we have in front of us because we are basically rebuilding the grid. But humility comes in the fact that it took us 120 years to build the grid that we’ve got. There are some who say we’re going to double or triple its size in 15 to 20 years. That’s probably a little much, but as an aspiration, I think it makes good sense. The grid we have was designed around the technologies that we had to work with and now those are different.

The grid in the West, for example, was largely designed to wheel Rocky Mountain coal and Pacific Northwest hydro to Los Angeles. I’ve offended a bunch of people by saying that, but that’s the way the grid was designed because that’s where the resources were. In 15 years, you’ll still have the hydro. Coal is clearly declining and some wind will replace that. But the big production capacity is going to be here in the Southwest with the solar. The grid wasn’t designed for that, so that’s where this call for transmission is so important.

The thing that’s true about renewable generation is that you can’t move the fuel; you’ve got to move the power. We’re going to generate where it’s windy, we’re going to generate where its sunny. We’ve got to have a grid that gets it from where it’s produced to where its going to be consumed, and do so reliably. That’s what we’ve got to get nailed.

What are your top initiatives for 2024?

Probably our highest priorities right now are to get the correct suite of inverter standards developed and approved, and then to complete the work around winterization of power infrastructure.

In addition, we will complete a regional transmission study that we were mandated by Congress to do. And that will inform a lot of our views on reliability, reliability gaps and where priorities are. It’s a mammoth effort, but we’re making progress.

Another priority that I have is to continue to shine a light on the issues around gas and electric integration, and to see if we can’t motivate some policy action on natural gas reliability.

And a fifth priority is advancing our understanding of planning as it relates to energy as opposed to capacity. Right now all of the reliability conversation is around reserve margins and capacity-based metrics, and we need to shift that conversation away from capacity to energy supply.

Is reserve margin now obsolete as a reliability metric?

It’s a necessary but insufficient metric. We have a map that shows two-thirds of the country at risk [of capacity shortfalls]. Most all those areas have adequate reserve margins, but reserve margins aren’t showing the risk that’s embedded in the generation. Reserve margins were generally calculated based on a view of random failures that would occur out on the grid. So if I pick my peak hour, typically a hot day in August, and say I need to have “X” gigawatts of generation, then I put a margin on top of that to account for things that will probably go wrong. And then I’d feel like I’ve got a pretty good chance of meeting that hour and every other hour of the year.

Well, with the variability in fuel supply — the rise of wind and solar and the uncertainties we have around gas — your ability to serve that peak hour doesn’t really tell you anything anymore about your ability to serve any other hour. You really have to get your head around fuel and how fuel is going to allow that generation fleet to produce energy. So that’s the planning transition that we’ve got to make.

Is any region making progress on such a transition?

Texas is probably furthest along in defining a reliability standard for energy. Australia has also some good work on this.

In the first half of 2024, we are going to try to bring parties together who have been working on this to share insights. If you think about it, our reliability metric right now is a one-in-10-year event based off a capacity reserve margin. That was formed when we had a metal-bending economy. That’s not us anymore, so that’s probably not the right metric to begin with. What that metric tells you is how frequently you might have a reliability event, but it doesn’t tell you how big it is or how long it’s going to last.

So what we’re advocating for is that we start thinking about hours of unserved energy, frequency of unserved energy and duration of unserved energy, and then start to plan the system around those metrics. Exactly how to do that, I don’t think anybody knows, but that’s where the conversation needs to go.

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.