Despite forecasts of higher than average temperatures for the West, Southwest and Northeast regions of the U.S., grid operators, with the possible exception of the Electric Reliability Council Of Texas, should have little trouble maintaining reliability this summer during periods of peak demand.
That conclusion was included in the Federal Energy Regulatory Commission staff's "Summer 2019 Reliability and Energy Market Assessment," which was presented during the agency's May 16 open monthly meeting. The report relies in part on information gathered by the North American Electric Reliability Corp. for its 2019 summer reliability assessment, to be released at the end of May.
Staff noted that net demand for power is expected to be approximately 0.3% lower compared to last summer due to reductions associated with greater energy efficiency and behind-the-meter systems. At the same time, generating capacity is anticipated to increase by approximately 1.1% from summer 2018, with staff citing reports that about 6.7 GW of mostly renewable generating capacity will enter commercial operations this summer.
Those additions will be partially offset by the loss of more than 2.6 GW of generating capacity scheduled to retire over the summer, including approximately 0.8 GW of coal-fired generation concentrated within the PJM Interconnection and 1.5 GW of nuclear capacity being retired in PJM and the ISO New England.
The regions will have plenty of reserves with the exception of ERCOT, which anticipates having an 8.5% reserve margin, well below its desired margin level of 13.75%. However, staff noted that ERCOT’s reserve margin in 2018 also was below the desired level, yet the grid operator maintained system reliability with no load curtailments.
Responding to a question by Commissioner Cheryl LaFleur, staff further explained that some of the tools ERCOT can use to manage the tight reserve margin include reserves tied to ancillary services, emergency response capacity, load control measures and voluntary load reductions. Another factor working to ERCOT's advantage is that more power can be sold into the market by industrial facilities in response to higher power prices during peak demand. ERCOT also was able to secure some additional capacity heading into the summer months, staff reported.
Commissioner Richard Glick acknowledged that the lack of a resource adequacy issue in most of the country is a good thing. However, he expressed concern that some regions have far more capacity than their targeted reserve margins. "I think as a whole this is something we'll be revisiting many times over," Glick said. "We need to figure that out how we can get closer to the reserve margin."
As for California, staff said above-average snowpack should provide a stronger hydropower summer season in 2019 relative to 2018, when below-average snowpack and drought conditions resulted in the lowest hydropower output since 2015. The greater availability of hydropower should replace some higher-priced natural-gas generation during summer peak periods, the staff report said. However, hydropower generation in other western states is expected to be slightly below historical levels, which may limit the amount of low-cost hydropower that can be imported into California during the summer.
Given that at least one of the highly destructive wildfires that hit California in 2018 was caused by power lines, staff noted that the National Interagency Fire Center is reporting an above normal risk for wildfires this coming summer in parts of California, Oregon and Washington.
While wildfires generally do not cause widespread electrical outages due to the distributed nature of the transmission system, the report said California utilities are stepping up their wildfire prevention activities by conducting additional inspections of electric facilities, controlling vegetation, installing additional weather monitoring stations, and performing around-the-clock monitoring. The utilities also are implementing a program that preemptively removes transmission and distribution lines from service to reduce the risks of wildfires.
Turning to the generation mix, ERCOT has the most natural gas-fired capacity at 56%, followed closely by New York at 55%. Staff said natural gas' overall generation share in the U.S. is expected to increase from 35% in summer 2015 to a projected 40% this coming summer.
Staff noted that the U.S. Energy Information Administration is reporting that since January 2015, 744 MW of battery storage has already been brought online or is planned to be added. In comparison, approximately 100 MW of battery storage capacity was operating or being planned in 2013. The fastest growth has been in the West, especially in California, which accounts for 30% of all continental U.S. storage capacity. Moreover, nearly two-thirds of planned battery installations are in California, staff said.
Staff said 290 new wind and solar generating units are scheduled to begin operating nationwide in 2019. Altogether, they will add approximately 14 GW of capacity, including nearly 4.5 GW of solar capacity and 9.3 GW of capacity from onshore wind turbines. No offshore wind turbines are expected to come online in 2019.
While this aggressive growth in solar and wind capacity may slow in the coming years with the decline in federal tax credits, staff said, lower manufacturing and installation costs for renewable generation may blunt some of the impacts of the loss of those credits.
Natural gas outlook
FERC staff expects gas futures prices this summer to be mixed compared to summer 2018, going higher in some regions, especially the West, Southeast and New England, and lower in the other regions.
New LNG export facilities coming online in 2019 will drive growth in U.S. gas demand, staff said. U.S. LNG export capacity could nearly double in 2019, from 3.6 Bcf/d at the beginning of the year to about 7 Bcf/d at the end of the year.
At gas storage facilities around the country, a high rate of gas injections should return storage inventory to average levels, staff said. Production growth in the Permian Basin and Marcellus Shale will have to support the high volume of injections. The EIA has projected that working gas storage levels will reach 3,673 Bcf by the end of October, which is about 70 Bcf below the five-year average.
In the Pacific Northwest and California, gas pipeline outages and constraints may contribute to higher gas prices, staff said, although abundant hydroelectric power production in California could partly offset potential increases in power prices due to higher gas prices. The SoCal Citygate hub outside of Los Angeles is trading at a premium greater than $3.00/MMBtu to the Henry Hub this summer. Staff said the premium largely is due to maintenance outages that will last through summer on the Southern California Gas Co. pipeline system.
Staff called natural gas inventories at SoCal's Aliso Canyon storage facility "an item of interest for electric reliability within the Western Interconnection." Operations at Aliso Canyon have been restricted ever since a multimonth gas leak was first discovered in late 2015.