By Todd Snitchler
At meetings of energy regulators, policymakers, consumer advocates and industry this summer, the content and tone of conversations about grid reliability have shifted dramatically. Executives from across the industry agree that demand-responsive generation is needed now and for years to come.
What is particularly encouraging is the recognition and willingness to state publicly that controllable resources such as electricity generation based on natural gas are needed as the expansion of energy supplies continues and load growth accelerates for the first time in decades.
For several years, the discussion about the future of the power grid revolved around how cost-effective it would be and how to take “politically unpopular” resources off the grid and replace them with politically preferred ones without causing disruption or reliability problems. And suddenly the situation has changed dramatically. Why?
First, load growth – and a significant portion of it is expected in the short term. Second, the pace of retirement of demand-responsive generation without replacements with similar performance characteristics. Third, the constant and increasing warnings from reliability organizations and grid operators that a crisis is coming, and fast, unless system planning improves.
What does this mean? In short, it is a long-awaited recognition of the reality of grid operations, coupled with a (begrudging in some quarters) realization that dispatchable resources such as natural gas will need to be maintained and used for a longer period of time than many have been willing to admit. This realization is consistent with a significant number of credible studies, including work by McKinsey and EFI, all of which have indicated that dispatchable natural gas generation would be required even in a high-renewables scenario.
As the reality of load growth, supply chain issues, permitting, siting and construction challenges affecting all types of resources, and dire warnings of looming reliability problems became clear, it became clear that the rhetoric was way ahead of reality. Recognizing the problem is the first step to solving it.
Now that all resources are responsible for their reliability, including controllable, intermittent, and storage resources, the requirement to consider and adapt to grid realities is no longer optional—it is mission critical. Retiring significant amounts of controllable resources without adequate replacement has brought us ever closer to a zero-tolerance system.
To correct this situation, policymakers and regulators should take action to minimise risk to customers. First, the time gap between system closures and expansions must be addressed; we cannot take existing resources off the grid before replacements are ready. The process for connecting new generations to the grid must be reformed to ensure that projects meet system requirements and not just policy announcements. Permitting and siting reforms are needed so that we can enable the development of all types of energy projects.
Second, policymakers need to temper their enthusiasm and set targets that are consistent with actual system needs and operational constraints. This could mean suspending policies that hinder the deployment of needed resources or introducing legislation to ensure grid reliability.
Third, grid operators must adapt markets more quickly to send the right signals that encourage investment in the necessary resources. States must recognize the broader benefits of market participation and the positive outcomes for their citizens, and stop requiring grid operators to do what one state wants to the detriment of another. States must again recognize that the benefits of their utilities participating in the market far outweigh their ability to dictate resources and schedules and then deny responsibility for the problems those decisions create.
Finally, this reality check does not mean that we turn away from achieving political goals. The bottom line is that we can set goals, but they must be linked to operational reality to ensure success and reliability.
Todd Snitchler is president and CEO of the Electric Power Supply Association (EPSA).
This article was originally published by RealClearEnergy and made available through RealClearWire.
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