US grid operators stress reliability challenges amid generator retirements, demand growth

The US energy sector is struggling with building delays and a changing resource mix as it works to meet rising electricity demand, six US grid operators said June 4.

A panel at the Federal Energy Regulatory Commission's technical conference centered on resource adequacy within organized regional transmission operators and independent system operators. Panelists included representatives from all six US grid operators and Jim Robb, president and CEO of the North American Electric Reliability Corp.

During the conference, the FERC commissioners pressed the panelists on maintaining adequate reserve margins amid high levels of generator retirements and rising demand for electricity from datacenters and artificial intelligence providers.

A later 2024 analysis by S&P Global Commodity Insights found that utilities plan to retire 61 GW of coal-fired power plants between 2025 and 2030 — equal to more than one-third of US coal capacity online in 2024. At the same time, S&P Global Market Intelligence 451 Research predicts that US utility power demand from datacenters could more than double by 2029.

That supply and demand mismatch has contributed to historically high capacity auction clearing prices in the PJM Interconnection market, as well as other regions.

During opening remarks, Robb noted that NERC identified a number of "interrelated factors," including increased reliance on weather-dependent renewable resources and more persistent extreme weather events, that have exacerbated the risk to reliability in addition to the supply and demand issues.

"First, we really believe that we need to modernize the design basis of the grid beyond the [current reliability standards]," Robb said. "And then secondly, we need a more consistent approach for accrediting capacity for its broad reliability competitions."

Reserve margin, resource accreditations

During the panel, the grid operators said that rising demand and falling supply risked resource adequacy in their respective regions.

Southwest Power Pool President Lanny Nickell said that while the region was currently resource-adequate, he had considerable reservations about the future, particularly the region's ability to build new generation to replace retired plants. Nickell said that while SPP enforced strict planning reserve margins and accreditation procedures on generators, the grid operator was "dealing with less reliability now than we used to have."

"I'm worried about the future, I'm not worried about right now," Nickell said. "I'm worried about the fact that it takes five years to get new generation built right, and this load is growing much, much faster than that."

FERC Chairman Mark Christie, whose term expires at the end of the month, asked if the commission should require grid operators' mandatory reserve margins and standardized resource accreditation methods for load-serving entities.

ISO New England President and CEO Gordon van Welie said that construct would not work for the grid operator because many load-serving entities in New England, such as municipal and cooperative utilities, are not subject to FERC jurisdiction. Van Welie noted that a change would require approval from state legislatures.

SPP saw success in instituting a "performance-based accreditation policy" that prioritized capacity resources most needed to meet the grid operator's reserve margin, Nickell said.

PJM President and CEO Manu Asthana said that while he generally supported Christie's idea for a standardized method to accrediting capacity resources, there were region-specific issues that could make a homogenous approach difficult.

Midcontinent ISO Senior Vice President Todd Ramey said that the region reached its minimum planning reserve margin in 2022 and has been "treading water" ever since. However, Ramey noted that price signals have led the grid operator's members to begin planning for less investment in renewables and more in dispatchable resources to better maintain resource adequacy.

"We're already starting to see our membership make adjustments, with the amount of planned renewable investments coming down and the amount of dispatchable investments coming up," Ramey said.

Interconnection delays

Commissioner David Rosner asked the grid operators about what progress they had made in clearing their interconnection queues, where long wait times and production delays led the commission to approve Order 2023, its final rule on reforms to interconnection procedures, in July 2023 to try and clear the backlog.

The panelists said that while they had seen success in clearing their interconnection queues, bottlenecks still remained that prevented needed generation projects from connecting to the grid.

Asthana said that one of the primary issues PJM faced when trying to get projects through the interconnection queue was determining cost allocation. If grid operators were able to provide more accurate cost allocation estimates earlier, projects could connect to the grid faster, he said.

"I do think we need to think about the interactions between different projects and the sort of level of precision that we're pursuing for cost allocation for cost causality, because that is really driving a lot of time in the process that isn't core engineering time, it's for restudy time," Asthana said.

Short-term solutions

Commissioner Judy Chang asked the grid operators what short-term solutions were needed to keep additional generation from retiring.

Nickell said that SPP would not need regulators to take emergency measures under Section 202(c) of the Federal Power Act, which allows the secretary of energy to require temporary connections of facilities or supply of electricity during wars or other emergency situations. That said, the grid operator needed to better signal to load-serving entities what types of generation to build, according to Nickell.

Van Welie said that capacity markets continued to play a "crucial" role in sending investment signals to utilities on what types of generation to build to remain resource-adequate.

"I think the primary tool for ensuring we remain resource-adequate is the capacity market; that's why it's so important to get the right price," van Welie said.