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FERC told transmission, not fuel security, is key to grid resilience

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FERC told transmission, not fuel security, is key to grid resilience

Many stakeholders weighing in on the Federal Energy Regulatory Commission's "holistic" look at the issue of grid resilience recommended that the effort focus more on beefing up the transmission grid and less on looking for ways to ensure fuel security.

Some trade groups suggested that since resilience is just a component of reliability and FERC has long placed a priority on ensuring that the bulk power system is reliable, the grid already is quite resilient. Even among those that believe certain steps should be taken to ensure grid resilience, few see the need for immediate FERC action.

FERC launched the proceeding at the same time as it rejected a U.S. Department of Energy proposal (FERC docket RM18-1) for the commission to institute new market rules providing full cost recovery and a return on investment to generators with 90-day on-site fuel supplies. The goals of the new proceeding are to develop a common understanding of what resilience of the bulk power system means and requires, to understand how each regional grid operator assesses resilience, and to use the information to evaluate whether additional FERC action is needed.

Each regional transmission organization and independent system operator in early March responded to a series of questions posed by FERC on the issue, including how to define the term resilience. Other stakeholders then had a chance to respond to the inquiry, and those first in the door with their comments showed that few shared the coal and nuclear sectors' interest in immediate action and market rule changes. A deeper look at the views of the power industry's major trade groups revealed similar sentiments.

Resilience definition needs more work

The Edison Electric Institute declined to take a position on FERC's proposed definition of resilience, noting that the description "appears to include matters" that fall under state jurisdiction. The commission accordingly should coordinate with the North American Electric Reliability Corp., the RTOs and ISOs, retail regulators and other federal agencies to develop a common understanding of what constitutes resilience, delineate the various entities' respective roles, and establish priorities, EEI said.

FERC also must take steps to "resolve the tension between transparency and security issues" and find the appropriate balance between involving a broad range of interested parties in resilience planning and ensuring that information regarding grid vulnerabilities and other sensitive issues is not widely disseminated, EEI added.

Moreover, noting that the comments filed by the various RTOs/ISOs in March show that the regions perceive resilience risks differently, EEI warned FERC not to delay acting on proposed remedies filed by the grid operators in order to address the matter generically. The commission likewise should not speed up the process for developing any generic changes, but first must engaged in a comprehensive dialog with a wide range of interested parties and then work toward reaching a consensus regarding steps forward to ensure that market participants are not subjected to conflicting, duplicative or overly burdensome requirements, according to EEI.

A wide-ranging coalition of mostly industrial end-user groups spearheaded by the Electricity Consumers Resource Council said resilience is not a new concept, as it "has always been one of the aspects of 'reliability,' which has been part of the mission of the commission and of NERC for many years."

However, some now are using concerns over grid resilience to justify market changes they sought unsuccessfully in the past "that will serve their own interests at others' cost," the industrial groups said. Among other things, they said the PJM Interconnection in its comments "referenced virtually all the potential price formation and market design changes that it has been considering in recent years, recasting the supporting rationale for them in the name of resilience."

FERC accordingly should "reject such opportunism" and continue addressing the resilience issue through its and NERC's ongoing reliability initiatives, the industrial groups said.

"If the power plants at issue are truly necessary for grid reliability and resilience, then [we] would share the concern," the industrial groups said. "Instead, we are deeply distressed by the immediate costs all consumers would face, as well as the long-term damage to the market due to proposed interventions."

Transmission key to resilience

The industrial groups also expressed concern that the focus on subsidizing uneconomic nuclear and coal-fired power plants in the name of grid resilience might be drawing attention and investment away from improvements in the transmission and distribution systems that can help ensure the power stays on in the first place.

"?wift restoration — perhaps the defining attribute of resilience — is little solace to manufacturers because the damage to the equipment and product has been done, and it may take weeks to repair the plant ??d restore production," the industrial groups said.

The Energy Storage Association said efforts to ensure system resilience should focus on transmission planning, noting that "infrastructure tends to be of central concern, rather than fuel supply," whenever major U.S. electric system disruptions occur for reasons other than extreme weather. And because energy storage enhances the utilization of all types of resources, the ESA said resilience could be further improved "by incorporating energy storage into transmission planning processes, facilitating the participation of distributed energy resources on the grid, and defining and creating priced services for resilience and flexible market operations where warranted."

The National Hydropower Association offered similar views with respect to incentivizing and compensating storage resources for their resilience attributes, noting that many reservoirs "have several months of 'stored energy' available to securely provide electric power, energy and ancillary services when needed."

Like the ESA, the American Wind Energy Association and the American Council on Renewable Energy jointly said any new action taken by FERC should focus on transmission issues, which have "a much greater impact on reliability and resilience than issues related to generation or fuel supply."

But to the extent that any fuel security or resource adequacy problems exist, AWEA/ACORE said such issues can be fixed "within the existing products and markets."

"For example, if the common mode failure of a gas pipeline or compressor station outage are found to impact multiple gas generators, that could be a basis for changing the capacity value of those generators," AWEA/ACORE said. "Those statistical assessments can be changed through simple rule changes filed with the commission."

Status quo is working

The American Public Power Association stressed the importance of determining and maintaining the appropriate balance between ensuring a reliable and resilient grid and maintaining reasonable electric rates for consumers.

"The grid can always be made more resilient against conceivable threats, and the commission must carefully evaluate measures aimed at promoting resilience to ensure that they are justified and cost-effective," APPA said.

APPA said it does not believe the RTO/ISO responses to FERC's questions regarding existing threats to resilience indicate that the agency needs to take any specific action, either generic or region-specific, at this time. If anything, FERC should simply develop general policy guidance "concerning how it will evaluate any proposed actions that proponents assert are necessary to support grid resilience," APPA said.

As for whether stakeholders should be focusing primarily on developing market mechanisms to ensure that resources' grid resilience attributes are properly valued, APPA said a better approach would be to find ways to accommodate state resource preferences in the mandatory capacity markets.

Mandatory capacity market constructs "have not proven to be an optimal means to achieve a resource mix likely to provide all the attributes required for long-term system reliability and resilience," APPA said. "[ISO New England] and PJM — two regions with mandatory capacity markets — identify the most significant, if not necessarily imminent, reliability and resilience concerns, largely related to growing reliance on natural-gas fired generation."

The National Rural Electric Cooperative Association, which said it supports maintaining an "all-of-the-above" generation portfolio, stressed the importance of giving each RTO/ISO the flexibility to determine its own resilience needs and devise its own solutions for meeting those needs.

Developing a one-size-fits-all approach to issues such as identifying desired resilience attributes and services and developing ways to compensate resources for those attributes and services "will not work," NRECA said. "Innovative regional solutions may develop into best practices, but that has not happened yet."

NRECA also said any compensation for bulk power system resilience services should be based on a resource's ability to provide those services — "not on the identity of the resource's owner, the owner's financial condition, or their regulatory status under state or local law." (FERC docket AD18-7)