American Electric Power Co. Inc. President and CEO Nick Akins believes steps need to be taken to slow the loss of U.S. coal-fired and nuclear power plants, but the company wants individual regions to decide how to ensure grid resilience.
The focus on resilience comes as the U.S. Department of Energy considers requiring grid operators to buy power from certain at-risk coal-fired, nuclear and other generating facilities to make the grid more resilient against cyber and physical attacks and natural disasters. The draft DOE plan is not final but has the U.S. electric power sector bracing for potentially major changes.
"I think something needs to be done. How it's done certainly is an issue," Akins told S&P Global Market Intelligence on June 5 on the sidelines of Edison Electric Institute's annual convention in San Diego, Calif.
AEP's generation portfolio traditionally has been coal-heavy, and the company's "all of the above" diversification strategy means it intends to continue investing in facilities that burn the fuel even as it ramps up spending on renewables in the next decade or so.
Although Akins did not provide a full endorsement of the DOE's proposal, he said the agency's efforts could further encourage stakeholders, including the Federal Energy Regulatory Commission, to find a way to define and ensure long-term grid stability.
"There's no long-term capacity component," Akins said. "It's all short term in nature, so that doesn't bode well for whether it's nuclear, coal or anything else."
Akins said lack of long-term revenue certainty was what drove AEP to sell its unregulated generation assets in the PJM Interconnection. "You couldn't make long-term capacity-related decisions because ... central station generation is a huge capital investment and you got to have price signals to do it."
He said the DOE's draft plan "will help us focus the effort on what is actually needed, because we have a lot of large transmission; the more renewables you have, the better off you are on in the aggregate sense. So then you think about what kind of large-scale resources you need to back that up as well."
But Akins expressed reservations about any plan that would disrupt competitive power markets. "We need to do studies ... to tell us which [units] are actually needed to support the grid," Akins said. "It doesn't say every nuclear unit would get support or every coal unit or anything else, but what it does say is we're going to look as a country in terms of what level of support we have in the various areas."
In an emailed statement following the interview, AEP said it supports a "region-specific planning analysis" to determine resilience challenges in those areas and come up with solutions. "These solutions may ultimately require generation support, but should not be limited to just generation," the company said. "All options should be considered, including transmission and distribution solutions, which may provide more cost-effective ways to ensure grid reliability and resilience."
That approach more closely resembles FERC's ongoing resilience proceeding than the DOE's draft proposal. FERC in January asked regional grid operators to define grid resilience and identify any concerns they had with ensuring it. The commission launched the proceeding after rejecting the DOE's September 2017 notice of a proposed rulemaking that would have guaranteed full cost recovery for plants operating in wholesale markets that hold at least 90 days of fuel inventory on-site — a rule that mainly would have benefited coal and nuclear generating units.
