trending Market Intelligence /marketintelligence/en/news-insights/trending/-KnP_xno5lQphSMlUk9xOQ2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Grid resilience comments show continued clear divide within power sector

Essential Energy Insights - June 11, 2020

Webinar Replay

Deep Dive on Oil & Gas for Financial Institutions

Essential Energy Insights - May 28, 2020

Essential Energy Insights - May 14, 2020


Grid resilience comments show continued clear divide within power sector

Few shared the coal and nuclear sectors' interest in immediate action and market rule changes to stave off retirements of baseload generation as comments on grid resilience flowed into the Federal Energy Regulatory Commission to meet a May 9 deadline.

Many said they saw no emergency requiring government intervention in the wholesale power markets and would defer to the judgment of the grid operators, which filed comments in March. One caveat to that was pushback against some tariff changes the PJM Interconnection suggested should be imposed across the country rather than just within its footprint.

Coal and nuclear interests, however, painted a more daunting picture of the need to prevent future grid disruptions prompted by a lack of fuel diversity that they contend will result from continued retirements of coal and nuclear plants that are not properly compensated for their reliability and resilience benefits. In recent years, those generators have been unable to compete with cheap natural gas and the growing penetration of renewable resources.

A January 8 FERC order put an end to the U.S. Department of Energy's proposal for FERC to institute new market rules providing full cost recovery and a return on investment to generators with 90-day on-site fuel supplies. The notice of proposed rulemaking (FERC docket RM18-1) was viewed by a number of power industry groups as favoring coal and nuclear generation to the detriment of other fuels.

The power industry was quick to take sides, drawing a clear line in the sand between the positions of the coal and nuclear sectors and practically everyone else, creating strange bedfellows among lobbying groups for competing fuels.

That divide remained as FERC embarked on a new proceeding (FERC docket AD18-7) to examine "holistically" the resilience of the bulk power system.

Pro-market solutions sought

For instance, the Electric Power Supply Association said grid operators should be afforded time to work with their stakeholders to identify resilience risks and put forth solutions to mitigate those concerns through "competitive, fuel neutral market-based mechanisms."

"Certainly, any hasty short term 'fixes' invoked based on speculative concerns cannot and should not be supported or approved by the commission, particularly calls to subsidize specific types of resources at the expense of well-functioning competitive markets and all other market participants," the association said in its comments. "Tipping the scales in this manner is not the way to ensure a reliable, resilient, secure system, and may in fact overturn the cup entirely."

The Natural Gas Supply Association, or NGSA, similarly argued that the grid operators' resilience assessments submitted in March "demonstrate that pro-market solutions have been and will continue to be the best means to ensure a reliable and resilient grid."

NGSA added that "it is clear that it is time to end discussions specifically directed at financially supporting uneconomic coal and nuclear plants in the name of resilience."

Regarding fuel security concerns often tied to increased reliance on natural gas-fired generation, the NGSA said adequate pipeline capacity was the answer. The group contended that "refocusing the resilience conversation will also allow time for power market participants to examine ways in which they can become stronger advocates for infrastructure investments where such investments are needed to support system reliability and resilience."

On the other hand, the industry-backed advocacy group Nuclear Matters pushed back on claims that no crisis exists, insisting that "if steps are not taken swiftly to maintain this diverse supply of energy, our nation's grid may not be able to meet these tests [posed by severe weather] in the future."

The group asked FERC to come up with a "viable economic solution" that alleviates market distortions "by properly recognizing the reliable and reliant values of nuclear energy."

In the same vein, the American Coal Council, whose membership encompasses the entire coal supply chain, called on FERC to take "corrective actions" to mitigate risks tied to "decreasing resource diversity [and] on-demand fuel availability issues" brought on by "greater amounts of less efficient, intermittent sources" entering the grid.

Such action, in particular, should "address the imperative of under-recognized attributes and contributions from baseload power plants," the American Coal Council said. "The absence of action will promote the path of reduced fleet and fuel diversity and is likely to expose consumers to higher electricity prices and diminished reliability and resilience."

The North American Coal Corp., which supplies generators with coal from its mines in Mississippi, New Mexico, North Dakota and Texas, argued for market rules to compensate mine-mouth generating units "for standing by to dispatch when they are needed."

"These mine-mouth operations offer something unique and invaluable to our customer's electricity generating portfolio — absolute, long-term fuel security with predictable fuel supply costs that spans decades," the company said. Yet, the competitive wholesale market provides no "compensation for assets that cannot come online and offline quickly, but are required to stay online to handle the day-to-day volatility of renewables, and, as a result, incur financial losses."

In addition to implementing new stand-by product compensation, the company also proposed "new 'ramp' product compensation for assets that can provide the needed energy-ramp capability to handle the abrupt changes in renewable generation capacity."

The American Coalition for Clean Coal Electricity added that "markets must explicitly value resilience attributes, just as the markets explicitly value reliability attributes." Further, it said that "FERC should direct the North American Electric Reliability Corp. to establish standards to ensure grid resilience, just as the industry has standards to ensure grid reliability."

Chatterjee cheers FERC's approach

NERC, in its comments, said it already addresses several aspects of resilience as a component of its reliability activities. But given the changing generation mix and evolving cyber and physical threats, NERC said it was re-examining its efforts to determine whether it should take additional action.

"Policies supporting [essential reliability services], fuel assurance, and security as key elements of resilience would help ensure that the [bulk power system] continues to evolve in a manner that supports reliable operation of a resilient grid" NERC said.

It added that FERC should consider building upon its natural gas-electric coordination policies "without unduly favoring any generation resource or infrastructure," requiring resource adequacy assessments to account for the just-in-time nature of gas delivery, and proposing market rules to ensure that generators will perform in normal and extreme circumstances.

The comments filed by independent system operators and regional transmission organizations in March showcased significant regional differences and offered a wide array of potential next steps. FERC extended its initial April 9 deadline for reply comments from other interested entities to May 9.

Commissioner Neil Chatterjee on May 8 said he hoped this approach would aid the commission in building a record to systematically evaluate whether further action by the agency on resilience is needed.

"We're not going to base it on one study versus another study or individual arguments," he said on the sidelines of the Independent Power Producers of New York's spring conference. "There's meritorious arguments on all sides of this, which is why it's complicated. But at the end of this, if we are to take some kind of policy step, it has to be supported and legally defensible."

Jasmin Melvin is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.