The organization that oversees reliability on the North American electric grid warns that an accelerated retirement of coal-fired and nuclear power plants over the next several years could lead to power outages, temporary shortfalls in surplus generation and transmission problems in several regions.
As a result, grid operators may need to rely more heavily on special contracts that pay generators to remain online until those risks are abated, the North American Electric Reliability Corporation said in a draft report obtained by S&P Global Market Intelligence titled "Accelerated Generation Retirements; Special Reliability Assessment" and dated Sept. 5. The report also suggested that regional grid operators "evaluate policies so that incentives exist to maintain necessary levels of essential reliability services and fuel assurance in the future resource mix."
Largely due to their inability to remain competitive in the face of cheaper natural gas-fired and renewable generation, U.S. coal and nuclear generators are closing in large numbers and the nation's energy mix is undergoing a major shift away from those fuels. But that trend has raised concerns about whether the system can handle such a rapid change and additional incentives are needed to keep more plants from retiring.
As of 2017, more than 46.5 GW of mostly older coal-fired generation had retired in the U.S. since 2011, and another 19 GW worth of projects were slated to close by 2027, according to the report. NERC said at least half a dozen nuclear units have retired since 2012, and 14 more units have announced plans to retire by 2025.
The Trump administration, particularly the U.S. Department of Energy, has proposed and is said to be mulling additional options for propping up financially ailing coal and nuclear generation in the name of resilience. Owners of the struggling nuclear and coal generation projects have pled for federal and state intervention, arguing that their projects can supply a degree of reliability that gas and renewables projects cannot.
The NERC report offers a high-level perspective on the risks the energy system could face from rapid plant retirements combined with either an extreme weather event or a fuel supply emergency such as a natural gas terminal going offline for an extended period. But NERC spokeswoman Kimberly Mielcarek in an email noted that the assessment should not be viewed as a prediction of future events. The "accelerated scenario is a stress-test intended to identify risks to reliability and is not a predicative forecast," she said.
NERC expects to publish the assessment in December, Mielcarek said. The version obtained by S&P Global Market Intelligence was circulated at the September meeting of NERC's planning committee. One U.S. grid operator, the PJM Interconnection, is slated to release its own fuel assurance report Nov. 1.
Whether NERC intends to take additional steps as a result of the report remains unclear. NERC CEO and President Jim Robb in a September press briefing indicated that the agency is considering establishing a mandatory, industrywide reliability standard for fuel assurance. The idea behind fuel assurance is that the ability of some types of generators to store fuel on-site provides a level of reliability that renewables and gas-fired projects cannot offer.
Not enough generation to go around
Much of the NERC assessment focused on the potential impacts of retirements on the Mid-Atlantic, Midwestern, Northeastern and Texas systems, but the document also reviewed risks for the systems in the Southeast, Rocky Mountain area and Southwest.
NERC considered two rapid mass retirement scenarios and found that insufficient new gas or renewable generation is in the pipeline in most regions to replace those coal and nuclear plant closures by 2022. Of the areas NERC reviewed, only the New York ISO region would have enough generation to go around under both scenarios.
The more extreme retirement scenario assumed that about 60% of coal and 75% of nuclear generation retire by 2022, and the low scenario assumed that about 30% of coal and 45% of nuclear projects retire by then. Under both scenarios, NERC assumed that gas generation would replace the lost nuclear and coal capacity regardless of whether enough gas capacity currently is expected to be online by 2022.
In contrast, the Midcontinent ISO, the SERC southeastern region, Southwest Power Pool and the two Western systems examined would "experience an exhaustion of all reserves and prospective generation resources currently in planning" under the low retirement scenario, the draft said.
The U.S. Energy Information Administration has projected a much more gradual pace of retirements over a longer period, the report said. The EIA's 2018 energy outlook forecast that 12% of existing nuclear generation would retire by 2030 and 25% of coal generation would retire by that year.
Texas, New England may face issues
At NERC's request, the Electric Reliability Council of Texas updated a 2016 transmission study to see how the grid would handle the removal of nearly 9,600 MW of coal-fired units, or almost half of the region's installed coal capacity. ERCOT found that the plant closures could result in more than 124 circuit-miles of 345-kV power lines and 12 circuit-miles of 138-kV lines experiencing thermal overloads. Thermal overload can cause lines to trip and go offline and also can damage transmission equipment. NERC in the draft assessment said ERCOT must address potential thermal overloads prior to generator retirements.
Public Service Enterprise Group Inc. also performed a study of the impact of retirements on the grid managed by PJM in 13 Mid-Atlantic and Midwestern states and the District of Columbia. The company found that the retirement of 70 GW of generation could result in "multiple thermal overloads" on 230-kV, 345-kV and 500-kV lines. Most of those lines are in states along the Atlantic coast, according to a map NERC included in the draft report. But overloads also could happen on lines in northeastern Illinois and those near the border between Ohio and Pennsylvania.
A portion of the study focused on the ISO New England region, which in recent years has grown increasingly dependent on gas-fired generation. Most of those generators do not hold firm fuel supply contracts and instead make purchases through the secondary market. But in the winter, particularly during extreme cold snaps, those surplus supplies sometimes dry up because the gas is being used to meet customers' indoor heating needs.
The ISO-NE in a January fuel-security analysis found that the retirement of 4,500 MW of coal- and oil-fired power plants by 2025 could result in 105 hours of load shedding, or rolling blackouts, over 16 days, the NERC report noted. The New England grid operator also found that a winter-season-long outage of a natural gas pipeline compressor potentially could trigger up to 138 hours of load shedding over 17 days.
Regional grid operators have processes that account for generation retirements and additions, but the report noted that those measures can take five years or more and may not be suited to handle retirements if they occur at a faster pace. Regional grid operators have one last resort option, however, called reliability-must-run contracts, under which closing generators are paid to stay online until transmission lines can be built or new plants become operational. The NERC assessment suggested the grid operators may need to rely on those arrangements more frequently going forward.
After the ISO-NE issued its fuel assessment, the grid operator in September proposed to update its existing rules to allow it to sign reliability must-run agreements with generators to address fuel security concerns that may arise if the projects retire. The proposal was prompted by Exelon Corp.'s announcement in March that it would close its combined-cycle, natural gas- and waste heat-fired Mystic River 8 and 9 units in 2022.