FERC's Chatterjee mulls post-pandemic grid reliability as dispatch patterns shift

FERC Chairman Neil Chatterjee said he sees a need to turn attention to grid reliability challenges that could arise when the country reopens following pandemic precautions, particularly if shifting dispatch patterns threaten the viability of some generating resources.

"I want to start getting people at the commission, at a federal and state level, [and] stakeholders of the commission, to start thinking through what are the challenges we are going to face when we reopen and come out of this," Chatterjee said during a virtual interview Wednesday with Atlantic Council Energy Advisory Group Chair David Goldwyn.

He mentioned challenges to utility liquidity, and the potential for planned outages to occur outside the shoulder season, potentially coinciding with a surge in demand.

DEMAND SHIFTS

He also questioned what a shift in demand could mean for various sources of generation.

"Right now because of low cost, because of flexibility, gas is being dispatched at a higher rate. That's putting pressure on renewables, on nuclear, on coal," he said. "Could we see shutdowns occur as a result of economic pressures and then when we reopen, see a surge in demand and potentially have threats to reliability?"

If some sources of generation don't survive, Chatterjee called it FERC's obligation to make sure the grid remains reliable and affordable.

"So that's what we will be monitoring in a fuel-neutral way," he said.

According to S&P Global Platts Analytics, in the seven-day period ending April 28, power load in the Lower 48 was 8% lower than pre-pandemic models had predicted.

Despite lower loads, gas generation in 2020 is forecast by Platts Analytics to be 13 GW per hour higher on average than in 2019, as lower gas prices help edge out coal. Coal-fired generation is seen declining 22 GW/hour on average and nuclear down 2 GW/hour. Renewables generation is seen increasing, with wind generation up 5 GW/hour on average in 2020, and solar up 1.3 GW/hour, while hydropower declines 1 GW/hour, according to Platts Analytics.

ROE APPROACH

Separately, Chatterjee reflected on whether the commission's return on equity approach would need rethinking as a result of the pandemic.

For now, he said FERC should provide certainty to investors and stakeholders by continuing the course it is on, finishing work on a pending rulemaking on transmission incentives, and acting on several pending cases before it.

After that, he suggested FERC should convene a larger discussion with experts.

"What happens if a utility credit rating is reduced because they're unable to recover costs that they've incurred during the pandemic? What happens if companies are facing bankruptcy? What happens if investment is deferred because of the newfound risk that is coming about as a result of the pandemic?" he said.

Chatterjee also fielded a question about how weakened global demand for LNG may affect how FERC views that market and decides on new LNG projects, and he suggested conversations with foreign policy experts could factor into the equation.

"We need to really think through and bring in foreign policy experts to see what are the policy initiatives that are going to come out of this pandemic. When it comes to trade and foreign policy, how will that impact energy policy?" he said.

Describing "a real bullishness around US LNG and a real desire on the part of our allies" to work with the US prior to the pandemic, he said, "I think we have to anticipate during a global rebound a resurgence of demand."